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BREADTALK IHQ30 TAI SENG STREET #09-01 SINGAPORE 534013
w w w . b r e a d t a l k . c o m
ANNUALREPORT
2018
CHAIRMAN’S MESSAGEpg 12
Inspiring innovative F&B concepts; delighting the world everyday
BUSINESS REVIEWSpg 30
Strengthening brands and widening footprint
GROUP CEO’S MESSAGEpg 14
Spearheading the Group’s portfolio growth and expansion into new markets
AN
NU
AL
RE
PO
RT
2018BREA
DTA
LK G
RO
UP LIM
ITED
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CONTENTS
01 CORPORATE PROFILE
10 FINANCIAL HIGHLIGHTS
12 CHAIRMAN’S MESSAGE
14 GROUP CEO’S MESSAGE
17 BOARD OF DIRECTORS
21 SENIOR MANAGEMENT TEAM
24 AWARDS & ACCOLADES
26 BREADTALK GROUP LIMITED & SUBSIDIARIES
28 GEOGRAPHICAL REACH
30 BUSINESS REVIEW: BAKERY
34 BUSINESS REVIEW: FOOD ATRIUM
36 BUSINESS REVIEW: RESTAURANT
38 BUSINESS REVIEW: 4ORTH FOOD CONCEPTS
40 INVESTOR RELATIONS
41 CORPORATE GOVERNANCE
69 FINANCIAL STATEMENTS
198 STATISTICS OF SHAREHOLDINGS
200 NOTICE OF ANNUAL GENERAL MEETING
INSIDE BACK COVER CORPORATE INFORMATION
CORPORATE INFORMATION
DIRECTORS
• Dr George Quek Meng Tong• Ms Katherine Lee Lih Leng• Mr Ong Kian Min• Mr Chan Soo Sen• Dr Tan Khee Giap• Mr Paul Charles Kenny
COMPANY SECRETARIES
• Chew Kok Liang • Shirley Tan Sey Liy
REGISTERED OFFICE
30 Tai Seng Street#09-01 BreadTalk IHQSingapore 534013Tel: 6285 6116Fax: 6285 1661
BANKERS
• China Construction Bank• DBS Bank Ltd• JPMorgan Chase Bank, N.A.• Oversea-Chinese Banking
Corporation Limited• Standard Chartered Bank
(Singapore) Limited• United Overseas Bank Limited
SHARE REGISTRAR
RHT Corporate Advisory Pte Ltd9 Raffles Place #29-01Republic Plaza Tower 1Singapore 048619
AUDITORS
Ernst & Young LLPOne Raffles QuayNorth Tower Level 18Singapore 048583
Partner in charge: Philip Ling (since financial year ended 31 December 2016)
ANNUAL REPORT 2018
IBCIFC
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CORPORATE PROFILE
The BreadTalk Group is blazing the trail in the global lifestyle industry with its portfolio of award-winning F&B brands that are specially
created to bring exciting concepts and distinct flavours to delight consumers.
Founded on the core values of integrity, mutual respect, teamwork and innovation, the Group is celebrating 18 years of continuous growth with 12 brands under its management, and nearly 1,000 outlets spanning 16 countries including Singapore, China (including Hong Kong and Taiwan), Malaysia, Indonesia, Thailand, Myanmar, India and the United Kingdom.
Supported by a global staff strength of 7,000, its stable of perennial brands include BreadTalk, Toast Box, Bread Society, Food Republic, Thye Moh Chan, The Icing Room and Sō; and five franchise brands – Din Tai Fung and Wu Pao Chun Bakery from Taiwan, China, the popular Song Fa Bak Kut Teh from Singapore, and Nayuki and TaiGai tea brands from Shenzhen, China.
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REFININGSTRATEGIES
STAYINGINNOVATIVE
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REVENUE at the Bakery Division declined
5.1% to S$282.0 million in FY2018 from
S$297.0 million in FY2017
EBITDAfor the year was
$22.5million
2.2% lower compared to FY2017
million2.2% lower compared to FY2017
BreadTalk Tiong Bahru Plaza, Singapore
Chilli Crab Puff
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EMPOWERING PARTNERSHIPS
INTEGRATING STRENGTHS
Food Republic AEON Mall Sen Sok City, Phnom Penh, Cambodia
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REVENUE at the Food Atrium Division grew
5.1% to S$156.9 million in FY2018 from
S$149.3 million in FY2017
EBITDAfor the year was
$31.2 million
24.3% higher compared to FY2017
Food Republic AEON Mall Sen Sok City, Phnom Penh, Cambodia
Sergeant Chicken Rice
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ENHANCING RESILIENCE
EXTENDING REACH
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REVENUE at the Restaurant Division grew
8.2% to S$152.3 million in FY2018 from
S$140.7 million in FY2017
EBITDAfor the year was
$28.1 million
6.6% lower compared to FY2017
Din Tai Fung City Square Mall, Singapore
Steamed Xiao Long Bao
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PUSHINGBOUNDARIES
PROMOTINGCREATIVITY
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REVENUE at 4orth Food Concepts Division grew
80.3% to S$14.2 million in FY2018 from
S$7.9 million in FY2017
EBITDAfor the year was
-$2.9million
Nayuki VivoCity, Singapore
Supreme Cheese Strawberry & Strawberry Blush Mystique
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FINANCIALHIGHLIGHTS
Singapore
58%
Rest of the World
8%
Mainland China
26%
Hong Kong
8%
CASH & CASH EQUIVALENT VS NET DEBT (S$’MILLION)
CASH FLOW FROM OPERATIONS VS FREE CASH FLOW (S$’MILLION)
2014
Cash and Cash Equivalents Cash Flow from OperationsNet Debt Free Cash Flow
20142015 20152016 20162017 20172018 2018
41.0 17.8
65.6
95.5
30.4
94.9
29.060.741.4
102.4
73.3
106.8120.6
82.5185.077.6
66.5
NET PROFIT (S$’MILLION)
12.2
7.6
11.4
21.7
15.2
2014 * 2015 2016 2017 2018
REVENUE (S$’MILLION)
589.6624.1 615.0 599.6 609.8
2014 2015 2016 2017 2018
EBITDA (S$’MILLION)
2015
77.5
2014
70.9
87.5
2016
84.3
2017
80.2
2018
REVENUE MIX BY BUSINESS SEGMENT
- FY2018
REVENUE MIX BY GEOGRAPHICAL
SEGMENT - FY2018
Bakery
47%
4orth
2%
Food Atrium
26%
Restaurant
25%
141.2
50.5 50.7
* Excluding the restatement impact from the change in accounting policy
BREADTALK GROUP10.
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(1) Return on equity is defined as profit attributable to equity holders of the company divided by average shareholders’ equity.
(2) Net gearing is defined as total borrowings and debt securities less cash and cash equivalents divided by shareholders’ equity.
2016 2017 2018
INCOME STATEMENT (S$’000)
Group Revenue 614,995 599,579 609,796 Bakery 306,864 297,020 282,004 Food Atrium 157,901 149,346 156,895 Restaurant 137,662 140,732 152,316 4orth 7,838 7,859 14,173
Group EBITDA 87,517 84,250 80,172 Bakery 29,181 23,023 22,514 Food Atrium 16,561 25,102 31,207 Restaurant 29,518 30,133 28,149 4orth 278 533 (2,894)
Group PATMI 11,436 21,680 15,191 Bakery 9,404 8,039 3,490 Food Atrium (9,620) 6,557 12,295 Restaurant 12,816 13,272 12,378 4orth (657) (357) (3,424)
CASH FLOW STATEMENT (S$’000)
Cash flows from operating activities 82,485 77,550 65,630 Capital expenditure, net (31,905) (26,805) (47,821)Cash flows used in investing activities (18,249) (30,922) (51,503)Net increase/(decrease) in borrowings 20,605 1,340 43,783 Cash flow from/(used in) financing activities (38,173) (24,446) 30,024
BALANCE SHEET (S$’000)
Total Assets 533,903 551,613 608,859 Cash and cash equivalents 120,589 141,245 184,975 Property, plant and equipment 180,663 169,097 173,413 Total Liabilities 381,958 396,733 446,123 Bank borrowings and debt securities 181,310 182,634 225,935 Net debt 60,721 41,389 40,960
KEY RATIOS
EBITDA margin (%) 14.2 14.1 13.1 Net margin (%) 1.9 3.6 2.5 Return on equity (%)(1) 8.8 16.9 11.5 Dividend payout ratio (%) 94.7 90.9 55.6 Net gearing (x)(2) 0.46 0.32 0.31 Net debt / EBITDA (x) 0.69 0.49 0.51 EBITDA / Interest expense (x) 14.76 15.54 8.71
PER SHARE INFORMATION (S$‘CENTS)
Earnings per share - basic 2.04 3.85 2.70 Earnings per share - diluted 2.03 3.85 2.70 Net assets per share 27.01 27.52 28.89 Dividend per share 1.93 3.50 1.50
FINANCIAL PERFORMANCE SUMMARY Financial year ended 31 December
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CHAIRMAN’S MESSAGE
Dear Shareholders,
FY2018 IN REVIEW
Singapore is renowned as one of Asia Pacific’s top dining destinations, with the Food
Services industry playing a critical role in the local economy. This has underscored our growth in the last 18 years. From the year 2000, when we started our first boutique bakery in Bugis Junction, we have expanded beyond the Bakery business to include Food Atrium, Restaurant and the 4orth Food Concepts divisions. Today, we are a leading global food and beverage (F&B) lifestyle group, managing 12 different F&B brands, with close to 1,000 outlets spanning 16 countries, supported by a global staff strength of 7,000.
Although we have established our presence globally, our roots remain firmly entrenched in Singapore. We were therefore honoured to contribute towards nation-building by participating as principal and major partners for National Day Parade 2018 through our brands BreadTalk, Food Republic and our first halal B2B brand Buzzi Nook, for the first time in our Group’s history.
In 2018, despite the challenging macro environment, we remained steadfast in building our pipeline for future growth through strategic joint ventures and investing in our talent pool and support infrastructure. We maximised opportunities in existing markets by introducing new brands like Song Fa Bak Kut Teh in Mainland China, and Nayuki and TaiGai in Singapore. In addition, we expanded into a new market with the opening of our flagship Din Tai Fung restaurant at Covent Garden, London, which also marks our entry into the United Kingdom (UK).
Our relentless efforts in building and strengthening our brands have once
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again gained global recognition with our founding brand, BreadTalk, winning the prestigious “Brand of the Year” in the Bakery category at the World Branding Awards 2018-2019. This is the fourth time we have been bestowed with this honour in the last five years, placing us alongside the likes of other renowned international brands. Toast Box achieved a triple win at this year’s Singapore Prestige Brand Award (SPBA), a timely recognition of the brand’s growth since winning the SPBA Promising Brand title in 2009. These awards serve as encouragement that we are on the right track to reach, serve and delight our consumers around the world.
A NEW VISION AND MISSIONTo support and embrace our continual growth as a Group, we refreshed our vision, mission statement and core values at the start of the year.
Our vision “Inspiring innovative F&B concepts; delighting the world everyday” will empower our employees worldwide to boldly forge ahead with confidence by re-imagining and developing F&B concepts that will excite and serve our customers, thereby securing our long-term success. The addition of new brands to our portfolio is conducted through a strategic and carefully- considered process, reflecting a key tenet of our long term strategy – to develop a multi-product portfolio for broad-based sustainable growth.
Our mission “Fostering a creative, transparent and collaborative culture in the passionate pursuit of excellence through continuous improvement – in our people, products and processes” provides a guided path for our front-line and support functions to work together as one team - collaborating, communicating and pursuing excellence collectively so that we can continually aim to serve
our consumers with the best dining concepts and products.
As we pursue growth, we are reminded that our roots are deeply ingrained in our six core values of “Valuing and nurturing our people”, “Personal and professional integrity”, “Embracing innovation as a way of life”, “Taking pride in our work”, “Supporting lifelong learning and open communication” and “Giving back to our society”. Together with the Senior Management team, I am optimistic that our newly-minted vision and mission statement will continue to propel the Group towards a successful and brighter future.
A STRONG AND DYNAMIC WORKFORCEIn a labour-reliant industry like F&B, attracting and retaining the best talent to live and breathe our newly-minted vision and mission statements are vital ingredients to our success. To groom our next generation of leaders, we launched a High Potential programme where some of our brightest young employees with leadership potential are identified. They will be nurtured and groomed through mentorship, special projects and development courses to prepare them for future leadership roles.
Learning is critical for an organisation’s sustainable growth, and our team has fostered a learning culture through our in-house comprehensive suite of technical, culinary service, corporate and leadership training programmes. This is complemented by an open online course platform to allow staff to pursue courses in their own time.
We continue to leverage technology to manage, engage and develop our 7,000 team members. We have consolidated our HR management systems in the various markets onto a global platform.
In Singapore, we launched an Employee Portal, while in Mainland China, we introduced an enterprise solution to enhance employee communications. We also strengthened e-learning capabilities to improve scalability and effectiveness of our training efforts.
REWARDING SHAREHOLDERS In appreciation of our shareholders’ continued support, the Directors are pleased to recommend a final tax-exempt dividend of 1.0 cent per share. Combined with the interim tax-exempt dividend of 0.5 cent per share paid during the year, total dividend payout for FY2018 is 1.5 cents per share.
During the year, we completed a one-to-two share split which we hope will increase our base of shareholders, make our shares more affordable and thereby, maximising the liquidity of our shares in the market.
APPRECIATIONOn behalf of the Board, I would like to thank all management and staff who worked so hard to deliver this set of encouraging results amidst tough trading conditions. I would also like to express my gratitude to Mr Henry Chu, Group CEO for his stellar leadership of the entire Group, my fellow Directors, the senior management team for their commitment and contributions, and also to Mr Oh Eng Lock, who stepped down in August, for his invaluable contribution to the Group over the years.
Finally, my sincere appreciation to shareholders for their confidence and trust in the BreadTalk Group.
Dr George Quek Founder & Chairman
ANNUAL REPORT 2018 13.
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GROUP CEO’S MESSAGE
Dear Shareholders,
FY2018 IN REVIEW
2018 was a year of many firsts for the BreadTalk Group. We expanded our portfolio of brands and entered new markets globally. We also continued to maximise every
dollar invested to enhance our support infrastructure, hire talent and position ourselves for the next phase of growth.
However, all this was not without its challenges. Uncertainty continued to swirl amid trade tensions between the United States and China, exerting significant pressure as we deepen our presence in China while exploring opportunities to strengthen our presence in other existing markets.
Notwithstanding these macro-environmental factors, the Group remained steadfast in our pursuit of quality growth via a dual pronged approach - to meet our customers’ changing tastes with a wider portfolio of brands; and to improve the product and service offerings of our current brands. The Group turned in an encouraging performance for FY2018 with total revenue reaching $609.8 million, although net profit decreased 29.9% to $15.2 million against FY2017 due to weaker performance from the Bakery Division and higher start up costs from the 4orth Food Concepts Division.
Our share price continued to trend positively. On 17 May, we underwent a share split following which, our share price hit a record high of $1.25 (equivalent to $2.50 pre-split) on 3 July 2018, which equates to a market capitalisation of S$704 million.
GROWING NEW BRANDSThe 4orth Food Concepts business division was formed in 2017 to spearhead the Group’s portfolio growth and expansion into new markets. Since its formation, the 4orth team successfully rebranded RamenPlay into the profitable outfit Sō, and partnered Song Fa Holdings to bring Song Fa Bak Kut Teh to Shanghai and Beijing during the year and to Bangkok in 2019.
Through our market research, we identified a demand for premium bakery offerings and tea beverages by consumers in the region and decided to enter these markets through various partnerships with established and well-known brands.
Firstly, we partnered award-winning Wu Pao Chun Food Ltd (“Wu Pao Chun”) to operate Wu Pao Chun bakeries in four key Chinese cities - Beijing, Shanghai, Shenzhen and Guangzhou in March. In September, we expanded our partnership to bring this highly iconic brand to Singapore and Hong Kong. Founder of this popular bakery chain, Mr Wu Pao Chun won the 2010 Masters de la Boulangerie and World’s Best Baker in the International Union of Bakers and Confectioners (UIBC) International Competition of Young Bakers. He was also conferred a medal by the Elite de la Boulangerie Internationale
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(EBI) in February 2018, in recognition of his contribution to the global baking industry, making him the first bread master in Asia to receive such honours.
The first Wu Pao Chun Bakery opened successfully at Xintiandi Mall, Shanghai on 7 December. Looking forward to 2019, we will continue to grow the brand by opening the second Wu Pao Chun Bakery at Shanghai IFC mall, and our first flagship store in Capitol Piazza, Singapore.
Secondly, we partnered Shenzhen Pindao Food & Beverage Management Co Ltd to bring two popular Chinese specialty tea brands Nayuki (奈雪) and TaiGai (台盖) to Singapore and Thailand, with first right of refusal to operate outlets in Malaysia, Indonesia and the Philippines in May. Founded in 2015, both brands have since grown to become two of the most iconic beverage brands in China, with more than 240 stores in 22 major cities including Beijing, Shanghai, Guangzhou and Shenzhen. Since the opening of the TaiGai flagship store at NEX mall in Serangoon on 5 September and the first Nayuki soft-euro boulangerie and artisanal tea cafe at VivoCity on 8 December, we have received encouraging response and are confident that both brands will continue to have a lasting appeal to our consumers.
The addition of these established brands is in line with our strategy to create a well-balanced portfolio, spanning a wide spectrum of product lines catering to consumers’ desires, which will continually generate profit and growth for the Group. Looking ahead, we continue to look out for new opportunities to expand our stable of brands and product offerings.
GROWING OUR ROOTS WITH A GLOBAL MINDSETEquipped with an expanded brand portfolio, we maintained our growth momentum in 2018 by making strategic inroads into new markets such as the United Kingdom (UK), India and Cambodia, while increasing our penetration in existing markets with high growth potential.
THE UNITED KINGDOMWe announced our ambitions to enter Europe more than two years ago. On 5 December, our dreams were realised with the opening of our first Din Tai Fung restaurant in London. Located in the famous theatre district, our two-storey flagship can hold up to 250 seats. The restaurant attracted long queues as well as the media’s attention, and was extensively reported globally. We will continue to grow our presence in London and are working towards opening our second outlet at Centre Point, strategically situated above Tottenham Court Road station and located within Central London, in 2019. Looking ahead, we will focus on growing the Din Tai Fung brand in London before bringing in other direct-owned brands such as BreadTalk and Food Republic into the UK followed by the rest of Europe.
MAINLAND CHINAWe continued our efforts to consolidate Bakery operations this year by transforming our ways of working in Mainland China. We focused on the optimisation of our procurement and supply chain operations to better manage costs, and we also commenced an exercise to review our franchising strategy in China, to be implemented gradually in 2019.
In addition to our direct-owned brands, we continue to work closely with our joint venture partner Song Fa Holdings to scale greater heights. Under this partnership, our first Song Fa Bak Kut Teh restaurant located at Shanghai Jing An Kerry Centre opened to roaring success in
January, with over RMB1 million in monthly sales. Following the initial success, we opened another two outlets located at Shanghai IAPM in June and Shanghai Parkside in November 2018. In December, we opened our fourth Song Fa restaurant at Beijing APM Mall and will work towards our fifth restaurant at Shanghai IFC in 2019.
INDIAThis year, we returned to India and partnered with the Som Datt Group Group, a reputable and established infrastructure and construction conglomerate in India. India’s fast-growing economy has led to the growth of a rising middle-class with higher purchasing power and increased appetite for multinational brands. Together with our partner, I am confident that we will be able to leverage each other’s strengths and establish BreadTalk as a leading bakery chain in India in time to come.
SINGAPOREIn the last 18 years, we remained dedicated towards serving our consumers in Singapore. As part of our expansion strategy beyond the heartlands, we launched our Toast Box kiosks concept at Singapore Press Holdings News Centre and Philip Street which were favourably received. This year, we secured outlet spaces for BreadTalk, Toast Box and Din Tai Fung in Jewel @ Changi Airport. This iconic destination will enable us to showcase our brands, and share our distinctive array of local cuisine with a global audience. We will continue to dedicate resources to strengthen our direct-owned brands such as BreadTalk, Toast Box and Food Republic through high quality product offerings to delight consumers in Singapore and beyond.
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CEO’SMESSAGE
CAMBODIAAfter more than two years of improving operational effi ciency within our Food Atrium Division, I am pleased to report that our net profi t well exceeded initial estimates and stall occupancy rates are at an all-time high across different markets. We continued to build on this positive growth momentum by opening our fi rst Food Republic atrium at AEON Sen Sok Mall Cambodia, a new and exciting market with great potential, in December 2018.
MALAYSIA AND INDONESIAIn our efforts to reach out and serve our consumers in Malaysia and Indonesia, we signed key strategic partnerships with PT Pura Indah Berkat to grow our Toast Box business in Indonesia while implementing our signed agreement with United Malayan (UM) Land Bhd to build the BreadTalk and Toast Box businesses in Malaysia. In addition, both markets have a sizeable domestic population and we are excited to have the opportunity to bring our products to them.
BUILDING NEW CAPABILITIES – A TRANSFORMATIONAL JOURNEY A key lesson from our past expansion efforts was the importance of having robust back-end support infrastructure and effi cient collaboration among business units. Without these strong pillars of support, our expansion plans would have been futile.
As such, we embarked on a transformation journey in the last two years by making some major changes in the way we do things. While it is not easy to assess the immediate fi nancial impact of these key projects, upon refl ection, I would like to share how much the organisation has changed since then. On 22 December 2017, we signed a joint-venture with Shinmei Corporation to incorporate
BTG-Shinmei. One year on, we have taken signifi cant strides in streamlining our procurement processes which have yielded positive results. Not only did we manage to increase overall cost effi ciencies by procuring in larger quantities, we were able to witness seismic shifts internally as our various divisions started to collaborate and communicate more. We will continue to move in the right direction of centralising our remaining procurement processes and look forward with confi dence that we will be able to realise greater cost benefi ts through economies of scale.
We have also increased our investment in backend IT support systems to ensure that we can manage our ever-expanding global operations. We recognise that as the Group continues to grow and hire, we need to communicate with greater clarity and purpose to our outlet and corporate employees. In September this year, we launched our fi rst ever employee portal to connect and disseminate the latest company news to our employees in the Singapore.
We have moved to strengthen and increase our production capabilities to support the growth of our businesses in China. On 11 November, the Group entered into an investment agreement with Jiaxing Economic and Technological Development Management Team to design, build, own and operate the new central production facility located in Jiaxing, a prefecture level city in northern Zhejiang province. This new facility will leverage the latest state-of-the-art technologies to help us achieve greater operational effi ciencies and cost savings. The establishment of this facility will deepen our presence in China, and signals our long term commitment to grow in this key market.
We believe these strategic moves will keep us on track to achieving our goal
of becoming the fi rst Singapore Food and Beverage group to hit a market capitalisation of S$1 billion by 2022.
APPRECIATION Our success over the years has been built on our vision of “Inspiring innovative F&B concepts; delighting the world everyday” - a willingness to adopt bold and innovative approaches in our businesses. In this fast-paced and challenging environment, we have to remain nimble and vigilant to shifts in the competitive landscape as well as fast-changing consumer tastes to maintain our competitive edge. I am proud that we have stepped up as one team, empowered and engaged to always do better and push our shared ambitions to greater heights.
This would not have been possible without the commitment and efforts of our key stakeholders, to whom we owe our gratitude for their unfailing support, confi dence and trust. I would like to extend my appreciation to our founders, Dr George Quek and Ms Katherine Lee, our board of directors, senior management team, business partners for their unwavering support and our employees for their hard work and dedication in this journey of growth. To our customers, thank you for your support over the years, without which BreadTalk Group would have not enjoyed its present success. Your generous support spurs us on and we will continue to work hard to deliver the best value for you.
Mr. Henry Chu Group Chief Executive Offi cer
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BOARD OFDIRECTORS
Left to rightMR PAUL CHARLES KENNY | MR CHAN SOO SEN | MS KATHERINE LEE | DR TAN KHEE GIAP | MR ONG KIAN MIN
FrontDR GEORGE QUEK
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DR GEORGE QUEK MENG TONGChairman
Doctorate in Business Administration (Honorary), Wisconsin International University, USA
MS KATHERINE LEE LIH LENGDeputy Chairman
Date of first appointment as a Director
6 March 2003
Date of last re-election as Director
20 April 2018
Length of service as a Director (As at 31 december 2018)
15 years 10 months
Board committees served on
Nil
Present directorships in other listed companies
Nil
Major appointments (Other than directorships in other listed companies)
• Sky One Art Investment Pte. Ltd., Director• Ground Property Pte. Ltd., Director
Directorships in other listed companies held over the preceding three years
Nil
Background and working experience
• Founder of BreadTalk Group Limited• Led and grew the Company from a homegrown brand
to become a dynamic Asian F&B group. He continues to drive its strategic direction and development into the future
• George started his F&B business in Taiwan in 1982, successfully growing it into a chain of 21 Southeast Asian food outlets within a decade. He returned to Singapore in 1992 and founded Topwin Singapore and subsequently Megabite China in 1996, thus establishing the Group’s food court businesses
• In 2000, he started the bakery business with BreadTalk Pte Ltd and eventually brought it to list on the SGX in 2003
• George is a Brand Champion who has positioned the company’s brand portfolio into innovative concepts now widely accepted in Asia and throughout the world. His keen interest in the arts, creative talent and acute sense of anticipating consumer demands have delighted consumers time and again with the Group’s line-up of creative F&B concepts
• Among other awards, George won the Ernst & Young ‘Entrepreneur of the Year 2006’ (Emerging Entrepreneur Category), the ‘Entrepreneur of the Year Award 2002’ organised by the Association of Small and Medium Enterprises and The Rotary Club of Singapore, as well as the ‘Business Personality of the Year Award 2013’ accorded by Midas Touch Asia in conjunction with Channel NewsAsia, as well as the ‘CEO Brand Leader of the Year 2016’ by Influential Brands
Date of first appointment as a Director
6 March 2003
Date of last re-election as Director
20 April 2017
Length of service as a Director (As at 31 december 2018)
15 years 10 months
Board committees served on
Nil
Present directorships in other listed companies
Nil
Major appointments (Other than directorships in other listed companies)
• Heritage Pte. Ltd., Director• Ground Property Pte. Ltd., Director
Directorships in other listed companies held over the preceding three years
Nil
Background and working experience
• As a co-founder of the Group, Katherine spends her time on creating and advising product packaging and design, mentoring professional managers on managing traditional brands such as Thye Moh Chan and launching new concepts such as Wu Pao Chun Bakery successfully.
• Drawing from her many years of experience, she is also actively involved in advising the management team on choosing new markets to enter and strategic locations for new stores.
• Katherine has more than 20 years of experience in the industry. She was previously the Finance Director of Topwin Singapore, prior to which she was in charge of the Human Resource and Operations functions of more than 20 F&B outlets in Taiwan
BOARD OF DIRECTORS
BREADTALK GROUP18.
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MR ONG KIAN MINLead Independent Director
LLB (Hons) (Ext), University of London, UKB Sc (Hons), Imperial College (London), UK
Date of first appointment as a Director
30 April 2003
Date of last re-election as Director
20 April 2018
Length of service as a Director (As at 31 december 2018)
15 years 8 months
Board committees served on
• Audit Committee, Chairman• Nominating Committee, Chairman• Remuneration Committee, Member
Present directorships in other listed companies
• Food Empire Holdings Limited, Lead Independent Director• Penguin International Limited, Lead Independent Director• Silverlake Axis Ltd, Lead Independent Director
Major appointments (Other than directorships in other listed companies)
• Drew & Napier LLC, Consultant (until 31 March 2019)• Alpha Advisory Pte. Ltd., Senior Advisor• Kanesaka Sushi Pte. Ltd., Executive Director• OUE Hospitality REIT Management Pte. Ltd,
Independent Non-Executive Director• OUE Hospitality Trust Management Pte. Ltd.,
Independent Non-Executive Director• GPTW Institute (Singapore) Pte Ltd, Executive Director• Jekka-Molle Pte. Ltd., Executive Director• Qenergy Pte. Ltd., Executive Director
Directorships in other listed companies held over the preceding three years
• GMG Global Ltd, Independent Non-Executive Director• HUPSteel Limited, Non-Executive Chairman and
Independent Non-Executive Director• Jaya Holdings Limited, Independent Non-Executive
Director• LANKom Electronics Limited, Independent Non-
Executive Director
Background and working experience
• Member of Parliament (1997-2011)• Shook Lin & Bok (1993-2000), Partner• Called to the Bar of England and Wales in 1988 and to
the Singapore Bar in 1989• President’s Scholarship and Police Force Scholarship (1979)• More than 20 years of legal practice in corporate and
commercial law, such as mergers and acquisitions, joint ventures, restructuring and corporate governance
DR TAN KHEE GIAPIndependent Director
PhD (Economics), University of East Anglia, UK
Date of first appointment as a Director
1 October 2010
Date of last re-election as Director
22 April 2017
Length of service as a Director (As at 31 december 2018)
8 years 3 months
Board committees served on
• Audit Committee, Member• Nominating Committee, Member• Remuneration Committee, Member
Present directorships in other listed companies
• Boustead Singapore, AC Chairman• TEE Land Limited, Independent Director• Chengdu Rural Commercial Bank Co. Ltd.,
Independent Director
Major appointments (Other than directorships in other listed companies)
• Asia Competitiveness Institute & Associate Professor of Public Policy, Lee Kuan Yew School of Public Policy, National University of Singapore, Co-Director
• Singapore National Committee for Pacific Economic Cooperation, Chairman
Directorships in other listed companies held over the preceding three years
• Forterra Real Estate Pte. Ltd., Trustee-Manager of Forterra Trust
• Artivision Technologies Ltd.
Background and working experience
• Resource Panel of the Government, Member• Parliamentary Committee for Transport and Government• Parliamentary Committee for Finance and Trade &
Industry and Government Parliamentary Committee for Defence and Foreign Affairs (since 2007)
• Graduate Studies Office, Nanyang Technological University (2007-2009), Associate Dean
• Singapore Economic Society (2004), Deputy President• IPS Forum for Economic Restructuring (2003), Deputy
Chairman • Task Force on Portable Medical Benefits, Chairman• 2002 Economic Review Committee, Member
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BOARD OF DIRECTORS
MR CHAN SOO SENIndependent Director
MSc, Stanford University, USABA (Hons), Oxford University, UK
Date of first appointment as a Director
14 August 2006
Date of last re-election as Director
20 April 2016
Length of service as a Director (As at 31 december 2018)
12 years 5 months
Board committees served on
• Audit Committee, Member• Nominating Committee, Member• Remuneration Committee, Chairman
Present directorships in other listed companies
• Cogent Holdings Limited, Lead Independent Director• Midas Holdings Limited, Independent Director• Best World International, Independent Director
Major appointments (Other than directorships in other listed companies)
• Nanyang Centre of Public Administration, Nanyang Technological University, Adjunct Professor
• SCP Consultants, Chairman
Directorships in other listed companies held over the preceding three years
Nil
Background and working experience
• Singbridge International Singapore Pte Ltd (2009-2012), Executive Vice President
• Keppel Corporation (2006-2009), Director (Chairman’s Office)
• Ministry of Trade & Industry (2005-2006), Minister of State
• Ministry of Education (2004-2006), Minister of State• Prime Minister’s Office & Ministry of Community
Development & Sports (2001-2004), Minister of State• Prime Minister’s Office & Ministry of Health (2001),
Senior Parliamentary Secretary• Prime Minister’s Office & Ministry of Health
(1999-2001), Parliamentary Secretary• Prime Minister’s Office & Ministry of Community
Development (1997-1999), Parliamentary Secretary• Member of Parliament (1996-2011)• China-Singapore Suzhou Industrial Park Development
Co Ltd (1994-1996), Chief Executive Officer
MR PAUL CHARLES KENNYNon-Executive Director
General Management Programme, Ashridge Management College, UK
Date of first appointment as a Director
1 March 2016
Date of last re-election as Director
20 April 2016
Length of service as a Director (As at 31 december 2018)
2 years 10 months
Board committees served on
Nil
Present directorships in other listed companies
• Minor International Plc., Director
Major appointments (Other than directorships in other listed companies)
• The Minor Food Group Plc., Chief Executive Officer and Director
• Select Service Partner Limited, Director• Oaks Hotel & Resort Limited, Director• The Minor (Beijing) Restaurant Management Co. Ltd.,
Director• Minor DKL Food Group Pty. Ltd., Director• Liwa Minor Food & Beverages LLC, Director• Minor International Plc., Shareholder• S&P Syndicate Plc., Shareholder
Directorships in other listed companies held over the preceding three years
Nil
Background and working experience
• The Minor Food Group Plc. (2002-present), Chief Executive Officer
• The Minor Food Group Plc. (1993-2002), Senior Vice President/Chief Operating Officer
• Pizza Hut (Taiwan) Jardine Pacific Ltd. T.P.H. Company Ltd. (1990-1993), Managing Director
• Jardine Restaurant, Victoria, Australia (1987-1989), Operations Managerorporate governance
BREADTALK GROUP20.
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HENRY joined the BreadTalk Group as Managing Director on 17 October 2016 and was appointed Group Chief Executive Officer on 1 July 2017. As Group CEO, he oversees the Group’s global operations, focusing on the strategic planning of core F&B businesses, investments, business development and expansion into key markets.
Henry was instrumental in leading the team to develop the 4orth Food Concepts Division, whose key objective is to identify new F&B concepts and potential partnership opportunities with established brands. Concurrently, Henry holds the appointment of CEO, Bakery Division. In 2018, he clinched the ‘Executive of the Year – Food & Beverage’ at the Singapore Business Review Management Excellence Awards, for successfully growing the Group’s portfolio of brands, diversifying the business and turning around the Group’s financial performance.
Henry’s extensive experience in the F&B and retail spaces spans more than 25 years across renowned brands and various geographical regions. He started his career with Burger King, Starbucks and Delifrance in Singapore before embarking on successful overseas postings.
He held key positions that included Operations Director at Starbucks Thailand and Starbucks China and was General Manager, Retail Sales & Operations at Shell Eastern Petroleum, Singapore.
Between May 2010 and April 2012, Henry was CEO of the Bakery Division at BreadTalk Group before joining Maxim’s Caterers Ltd (Hong Kong) in May 2012 as General Manager of its Japanese Chain Restaurant Division (China).
Henry holds a Bachelor of Business (Human Resources Management) accredited by RMIT University and awarded by Singapore Institute of Management.
HENRY CHUGroup Chief Executive Officer
SENIOR MANAGEMENT TEAM
YING JIAN was appointed as Group CFO on 10 June 2015. As Group CFO, he is responsible for the corporate finance and treasury, shared services, reporting, tax, legal and risk management functions across our businesses. He also concurrently heads the Information Technology function of the Group, and is the Country Manager of the Group’s North China business. Ying Jian works alongside the Group CEO and Division CEOs on all Group and Division level investments, mergers and acquisitions, and joint ventures. He also fronts the investor relations efforts of the Group. He was Financial Controller of the Group’s Food Atrium Division from 1 August 2014 until his appointment as Group CFO. In 2018, Ying Jian was conferred the Rising Star (Professional Accountants in Business) Award by the Institute of Singapore Chartered Accountants (ISCA) for his strong leadership and achievement as a young
accounting and finance professional. Prior to joining the Group, Ying Jian was Vice President of Equity Research with J.P. Morgan Securities Singapore, serving as Sector Head of Agri-Commodities and Consumer Staples for the ASEAN region. As an analyst, Ying Jian was well regarded within the investment community for his thought leadership and actionable research ideas. He was named the “Top Earnings Estimator” for the Retail and Consumer Products sector at the 2012 Thomson Reuters Analyst Awards, and was the “Top Stock Picker” in the same sector in 2014. Ying Jian graduated summa cum laude (with Highest Distinction) from the Singapore Management University with a double-degree in Business Management (Finance) and Accountancy. He is also a Chartered Accountant of Singapore (CA Singapore) and a Chartered Financial Analyst (CFA).
CHAN YING JIANGroup Chief Financial Officer
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JENSON was appointed CEO, Food Atrium Division on 1 January 2011. He is responsible for the overall development, operations, projects execution and strategic planning of the Food Atrium business globally and is concurrently the Country Manager of the Group’s South China business.
Jenson has over 20 years of F&B experience, particularly in the food
court business. He joined BreadTalk Group in 2003 as Director of Food Republic in China. In 2005, he established Megabite Hong Kong Limited and oversaw the management and operations of Food Republic in Hong Kong as Managing Director. He was responsible for the overall development of BreadTalk and Toast Box operations in Hong Kong until his current appointment.
JENSON ONG CHIN HOCKCEO, Food Atrium Division
KEY MANAGEMENT
WILLIAM was appointed CEO of the Restaurant Division on 1 January 2011. He is responsible for driving sales and profitability across our Din Tai Fung businesses in Singapore, Thailand and the United Kingdom, as well as overseeing the company’s overarching business and marketing strategies, structure and people development functions.
All functional leaders in the Restaurant Division report to William. A 15-year veteran with the company, William has close to 30 years of extensive culinary and operations experience. With his stewardship, Din Tai Fung has successfully launched a state-of-art Central Kitchen and generated strong
sales and profit growth for the heritage brand. Under his leadership, the Taiwanese brand gained relevance through customer-centric initiatives supported by a people-centric culture.
He most recently spearheaded the expansion of Din Tai Fung’s global footprint by introducing the Taiwanese brand to Europe in December 2018. He led the opening of Din Tai Fung’s first restaurant at London’s Covent Garden, to great success.
William holds an Executive Masters in Business Administration from Nanyang Technological University Singapore.
CHENG WILLIAMCEO, Restaurant Division
BREADTALK GROUP22.
CHAN WING GITSenior Vice President, Human Resources,
Training & AdministrationCountry Manager, Thailand
FRANKIE QUEKHead, Real Estate
HUANG YINGREN, GLENNVice President, Group Corporate Affairs
and Communications
RUTH LEONGGroup Legal Counsel
JENNIFER ONGCountry Manager, Hong Kong
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AWARDS & ACCOLADES
DR GEORGE QUEKChairman
ORGANISERInfluential Brands
CATEGORYCEO Brand Leader of the Year
YEAR2016
ORGANISERMidas Touch Asia
CATEGORYBusiness Personality of the Year
YEAR2013
ORGANISERASME and The Rotary Club
CATEGORYEntrepreneur of the Year
YEAR2002
ORGANISERErnst & Young, Singapore
CATEGORYEntrepreneur of the Year
YEAR2006
BREADTALK GROUP24.
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ORGANISERShanghai Industrial Design Association
CATEGORYSuccessful Design Award
YEAR2014 & 2013
BREADTALK GROUP
ORGANISERWorld Branding Awards
CATEGORYBrand of the Year (Bakery)
YEAR2018, 2017, 2016 & 2014
ORGANISERSpring Singapore
CATEGORYSingapore Service Class
(S-Class) StatusYEAR
BreadTalk, Toast Box, The Icing Room & Bread Society - 2014
ORGANISERAVA Singapore
CATEGORYFood Safety Excellence Awards
(Grade ‘A’ Certifi cation)YEAR
BreadTalk - 2017
ORGANISERSME One Asia Awards
CATEGORYAvant Garde Award, Honoured
for Outstanding Creative Innovation
YEAR2012
ORGANISERChina Association for
Quality InspectionCATEGORY
Food Integrity and Quality Trust Award
YEAR2012
ORGANISERInfl uential Brands
CATEGORYTop Brand
YEARBreadTalk (Bakery)
2017, 2016 & 2015BreadTalk (Franchise)
2015BreadTalk (Pastry)
2014Toast Box (Asian Café)2015, 2014 & 2013
Food Republic (Food Court)2015 & 2014
Din Tai Fung (Asian Restaurant)2017, 2016, 2015, 2014
& 2013
ORGANISERSIAS Investors’ Choice Award
CATEGORYMost Transparent Company Award
YEAR2014, 2008, 2007, 2005
& 2004
ORGANISERWorld Brand Laboratory Award
CATEGORYFive Star Diamond Brand Award
YEAR2018, 2016, 2015, 2013,
2012 & 2006
ORGANISERShanghai Sugar Association,
ChinaCATEGORY
Shanghai Premium FoodsYEAR2012
ORGANISERFranchising and Licensing Association of Singapore
CATEGORYFranchisor of the Year Award -
FinalistYEAR2005
ORGANISERChina Chain Store & Franchise Association
CATEGORYCCFA Retail Innovation Award
YEAR2016
ORGANISERWorld Retail Awards
CATEGORYGrowth Market Retailer
of the YearYEAR2014
CATEGORYEmerging Market - Finalist
YEAR2009
ORGANISERHong Kong Design Centre
CATEGORYDesign for Asia Award
YEAR2004
ORGANISERSPRING Singapore
CATEGORYExcellent Service Award
YEARDin Tai Fung - 2018 & 2017
ORGANISERReader’s Digest
CATEGORYTrusted Brand Award
(Gold Award)YEAR
Din Tai Fung - 2018, 2017, 2016, 2015 & 2014
CATEGORYTrusted Brand Award
(Platinum Award)YEAR
BreadTalk - 2017
ORGANISERSingapore Prestige
Brand AwardCATEGORY
Most Popular Established BrandOverall Winner, Established Brand
Winner, Established BrandYEAR
Toast Box - 2018CATEGORY
Most Popular Brand, Regional Brands Category,
Overall WinnerYEAR2013
CATEGORYMost Popular Brand
YEAR2005 & 2002
CATEGORYMost Distinctive Brand
YEAR2005 & 2003
CATEGORYSingapore Promising Brand
YEAR2006, 2005 & 2004
CATEGORYPromising Brands, Overall Winner
YEARToast Box - 2009
Food Republic - 2008
ORGANISERBrand Finance
CATEGORYTop 50 Singapore Brands
YEAR2018, 2016 & 2015
CATEGORYTop 100 Singapore Brands
YEAR2017, 2014, 2013, 2012,
2011 & 2010
ORGANISERAccenture and
The Business TimesCATEGORY
Enterprise 50 Start Up AwardYEAR2002
ORGANISERAsia Marketing Federation
CATEGORYMarketing3.0 – Asia Marketing
Excellence AwardYEAR2018
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BREADTALK GROUP LIMITED & SUBSIDIARIES
BREADTALK GROUP LIMITED
BreadTalk Pte Ltd100%
Together Inc Pte Ltd100%
BreadTalk International Pte Ltd100%
BTG Vault Pte Ltd100%
BTG-Song Fa Venture Pte Ltd90%
Taster Food Corporation (Thailand) Co Limited
49%
Shanghai BreadTalk Gourmet Co Ltd
100%
BT Song Fa (Thailand) Co Ltd49%
Queens Coffee Pte Ltd100%
Taster Food International Pte Ltd90%
Shanghai BreadTalk Co Ltd100%
Song Yu (Beijing) Management Co Ltd
100%
Ramen Play Pte Ltd85%
Beijing BreadTalk Restaurant Management Co Ltd
100%
BTG-WPC Venture Pte Ltd80%
Thye Moh Chan Pte Ltd100%
Taster Food Pte Ltd70%
Avenue Ambience Sdn Bhd25%
Song Yu (Shanghai) Management Co Ltd
100%
Taster Food UK Ltd50.5%
Shi Shi Le Restaurant Management (Chongqing) Co Ltd
30%
BTG-Shinmei Venture Pte Ltd66%
Taster Food (Thailand) Co Ltd49%
Shanghai ABPan Co Ltd50%
BT SF Corporation (Thailand) Co Ltd49%
JBT (China) Pte Ltd30%
Beijing BreadTalk Co Ltd100%
BTG-Pindao Venture Pte Ltd90%
BTG-Song Fa-Pindao Venture Pte Ltd
90%
BreadTalk Investment Holding Co Ltd
100%
ML Breadworks Sdn Bhd100%
BreadTalk Jiaxing Food Manufacturing Co Ltd
100%
PT BTG Pura Indah Berkat Venture70%
51% 51%
51%
BreadTalk Thailand Co Limited49%
BreadTalk Corporation (Thailand) Co Ltd
49%
BTM (Thailand) Ltd100%
51% 51%
30%
51%
BREADTALK GROUP26.
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Subsidiaries
Joint Ventures
Associates
Topwin Investment Pte Ltd100%
Star Food Pte Ltd100%
Imagine IHQ Pte Ltd100%
Imagine Properties Pte Ltd100%
Food Republic Pte Ltd100%
Chongqing Food Republic Food & Beverage Mgmt Co Ltd
100%
Food Republic Taiwan Co Ltd100%
Shanghai Ramen Play Co Ltd60%
Xu Chun (Shanghai) Management Co Ltd
80%
FR Corporation (Thailand) Co Ltd49%
Apex Excellent Sdn Bhd50%
Food Republic Guangzhou F&B Management Co Ltd
100%
Food Republic (Shanghai) Co Ltd100%
Shanghai Star Food F&B Management Co Ltd
100%
Tate Projects Pte Ltd25%
Perennial (CHIJMES) Pte Ltd29%
FR (Thailand) Co Ltd49%
Food Republic (Chengdu) Co Ltd100%
Megabite Hong Kong Limited100%
Food Republic Shenzhen F&B Management Co Ltd
100%
Shanghai Food Court F&B Management Co Ltd
100%
Beijing Star Food F&B Management Co Ltd
100%
Megabite Eatery Sdn Bhd100%
Beijing Da Shi Dai Food & Beverage Co Ltd
100%
F R (Cambodia) Co Ltd100%
BreadTalk Concept Hong Kong Limited
100%
30%
51% 51%
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GEOGRAPHICAL REACH
Saudi Arabia
Bakery Food Atrium Restaurant 4orth
Sri Lanka
India
Myanmar
Kuwait
United Kingdom
Bahrain
Oman
Vietnam
Indonesia
PhilippinesThailand
Singapore
WITH A PRESENCE IN
16 COUNTRIES ACROSS ASIA, EUROPE AND THE MIDDLE EAST, THE BREADTALK GROUP’S CREATIVE CONCEPTS CONTINUE TO ENGAGE AND EXCITE CONSUMERS.
124ORTH
OUTLETS
60FOOD ATRIA
28RESTAURANTS
863BAKERIES
Cambodia
Malaysia
People’s Republic of China
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CHINA
Harbin
DongguanFoshanNanning
JinanTaiyuan
Luoyang
Huhehaote
Lasa
Wulumuqi
Lanzhou
YanchengChangzhouNanjing
Yangzhou
Ningbo
Suzhou
JinhuaChangsha
Chengdu
Chongqing
Xi’an
Hangzhou
Guangzhou
CLOSE TO
1,000OUTLETS
7,000EMPLOYEES ALL OVER THE WORLD
ShenzhenHong Kong
Taiwan
Tianjin
Wuxi
Beijing
Shanghai
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BUSINESSREVIEW
BAKERY
The Bakery Division registered a 5.1% decline in revenue to S$282.0 million in FY2018 from S$297.0 million in FY2017 on the back of lower contributions from direct operated stores in Shanghai, Beijing and Hong Kong, as well as lower franchise revenue from Mainland China. This was offset by stronger
contributions from direct operated stores in Singapore and international franchises. EBITDA for the year was S$22.5 million, 2.2% lower compared to FY2017 primarily due to weaknesses in profi tability in Mainland China. EBITDA margin was higher at 8.0% in FY2018, up from 7.8% in FY2017.
F I N A N C I A L H I G H L I G H T S
FINANCIAL OVERVIEW
Revenue and EBITDA (S$’m)
Revenue Mix by Geographical Segments
Direct Operated Stores Franchise
FY2018
FY2017
EBITDAfor the year was
$22.5million2.2% lower compared to FY2017
REVENUE at the Bakery Division declined
5.1% to S$282.0 million in FY2018 from S$297.0 million in FY2017
23.0
22.5
297.0
282.0
EBITDA (S$’m)Revenue (S$’m)
Mainland China
Singapore Others
Hong Kong
33%
64%
36%
55%
12%
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BreadTalkOver the years, the Bakery Division’s commitment to creative differentiation and innovation, as well as its unrelenting quest for excellence has seen it clinch numerous local and international accolades. This year was no exception, as BreadTalk was once again named “Brand of the Year” in the Bakery category at the World Branding Awards 2018-2019. This marks the third consecutive year that the brand has received this prestigious award, and its fourth win since 2014. To date, BreadTalk remains the only bakery brand from Singapore to have been awarded this title. In the Middle East, it took home the Excellence in Food Promotion award at the 2018 GCC Enterprise Awards by MEA
Markets, which recognises businesses that have demonstrated innovation, dedication and breakthrough in their business operations within the region.
These accolades are testament to our successful efforts in building the BreadTalk brand across an international platform over the last 18 years, and continue to spur us on in bringing a taste of Singapore and our quality bakery experience across the globe.
CELEBRATING SPECIAL OCCASIONS
Following BreadTalk’s 18th anniversary celebrations in July, we were privileged to be a part of Singapore’s 53rd birthday celebrations, as one of the Principal Partners of the National Day Parade. This included the sponsorship of several items in the National Day Parade Fun Pack, including our fi rst-ever halal certifi ed muffi n by Buzzi Nook, a brand extension of BreadTalk that specialises in producing and supplying semi-fi nished dough products that are halal-certifi ed. It truly befi tted our identity as a home-grown brand with deep roots in Singapore.
As part of the birthday festivities and celebration of Singapore’s unique local culinary culture, BreadTalk launched a selection of locally-inspired products, including the highly popular Golden Lava Flosss, which marries our signature Flosss bun with salted egg yolk - a local favourite! More than 120,000 of this limited edition product fl ew off the shelves in July.
H I G H L I G H T S I N F Y 2 0 1 8
Our limited edition Chilli Crab Puff was another runaway success, featuring a sweet, savoury and spicy fi lling synonymous with the popular local zi char dish. The crustacean-shaped puff was a crowd-puller, with more than 11,000 puffs sold within its inaugural launch week. The much-loved King of Fruits took the spotlight in our festive Durian Mini Croissants which were fi lled with a rich Mao Shan Wang cream fi lling, another overwhelming favourite among our customers, with the mini treat completely sold out by National Day’s Eve.
in producing and supplying semi-fi nished dough products that are halal-certifi ed. It truly befi tted our identity as a home-grown brand with deep roots in Singapore.
As part of the birthday festivities and celebration of Singapore’s unique local culinary culture, BreadTalk launched a selection of locally-inspired products, including the highly popular Golden Lava Flosss, which marries our signature Flosss bun with salted egg yolk - a local favourite! More than 120,000 of this limited edition product fl ew off the shelves in July.
business operations within the region.
18 years, and continue to spur us on in bringing a taste of Singapore and our quality bakery experience across
anniversary
privileged to be a part of Singapore’s
National Day Parade. This included
the National Day Parade Fun Pack, including our fi rst-ever halal certifi ed
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BUSINESS REVIEW
TAPPING TECHNOLOGIES, EXPANDING CAPABILITIES
We continued to strengthen our existing capabilities and invest in new ones for the future. Tapping on the rising trend of digitalisation, our fuss-free BreadTalk Rewards loyalty programme can now be used at more than 100 BreadTalk and Toast Box outlets in Singapore. The BreadTalk Rewards card/app allows customers to top-up and pay using their stored value top-up and purchase discounted product packages, while enjoying registration benefits such as welcome and birthday vouchers. This year, BreadTalk also embarked on a strategic partnership with Grab across its GrabPay, GrabRewards and GrabFood platforms. This partnership has enabled us to offer another popular cashless payment option to customers at all BreadTalk and Toast Box outlets across the island.
In an effort to expand our product range and bring the BreadTalk brand to a wider audience, we have successfully secured halal certification for our new brand - Buzzi Nook by BreadTalk. Dedicated facilities within the Bakery Division’s Central Kitchen can now produce and supply halal-certified dough and products, which will strengthen BreadTalk’s position in the respective halal markets. To date,
Buzzi Nook’s product mix comprises 28 flour mixes, 18 finished baked products and 37 semi-finished dough products.
STRENGTHENING THE BRAND, WIDENING OUR FOOTPRINT
Overseas, the Bakery Division continued to make headway into new markets while expanding our presence in existing locales. During the year, we partnered with India’s Som Datt Group to open our inaugural outlet in the capital city of India, Delhi, with plans to open a total of 15 outlets within Delhi and its satellite cities in three years. In Vietnam, we expanded our presence in Hanoi City, Nha Trang, and Ho Chi Minh with the opening of five new stores. We also marked another milestone in Cambodia with the opening of three new stores, in the capital city of Phnom Penh. Meanwhile in Myanmar, we added a third outlet at the iconic Myanmar Plaza, a mega-mall located in the heart of Yangon City.
This geographical expansion reflects the Bakery’s direction to focus on strategic high-growth markets, with store locations in choice areas of high footfall and densely populated locales.
OUTLET BY GEOGRAPHY
SINGAPORE
118MAINLAND CHINA
338HONG KONG
22SOUTHEAST ASIA AND REST OF WORLD
385
OUTLET MOVEMENT
OPENED
137CLOSED
145AS AT END FY2018
863
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Toast BoxFollowing the signing of our joint-venture agreement with United Malayan Land (UM Land) in end 2017, we rode on the momentum and successfully opened a total of four BreadTalk and Toast Box outlets in Malaysia in 2018, with a target to open 14 more stores in 2019. In addition, building on the success of the popular PT Pura Indah Berkat (PIB)-managed Toast Box outlet at Soekarno-Hatta International Airport Terminal 3, we have expanded our partnership with PIB to bring our signature Nanyang coffee, toast and Asian delights to a wider audience in Indonesia. We have since opened two stores under this agreement at Kota Kasablanka and Gandaria City in Central Jakarta, with plans to open 100 stores within a decade. In a nod to our brand accomplishments, Toast Box was awarded the Most Popular Established Brand and the Overall Winner in the Established Brands category at the Singapore Prestige Brand Award 2018, standing as a proud testament to our successful branding initiatives over the years.
Thye Moh Chan With its repertoire of traditional handcrafted Teochew baked goods, Thye Moh Chan has been a true icon and ambassador of Singapore’s food culture and history. It was thus fi tting for the brand to open its fi rst pop-up store at Singapore’s Changi Airport Terminal 2 from May to November. Marking the brand’s debut in a prominent national landmark, the store is designed with modern Peranakan-inspired tiles, light wood enhanced with rose gold accents, and dressed up with display elements that highlight
our signature products and our longstanding 75-year heritage.
The brand also launched a new durian pastry to appeal to tourists looking for a unique Singapore souvenir to take home. True to the fruit’s popularity, the durian pastry was a top-seller at the airport store since launch. During our promotional campaign in July, the quantity sold for the durian pastry went beyond 10,000 pieces! This popular product continues to be available at Thye Moh Chan’s stores at Chinatown Point and Paragon.
Terminal 2 from May to November.
prominent national landmark, the store is designed with modern Peranakan-inspired tiles, light wood enhanced with rose gold accents, and dressed up with display elements that highlight
During our promotional campaign in July, the quantity sold for the durian pastry went beyond 10,000 pieces! This popular product continues to be available at Thye Moh Chan’s stores at Chinatown Point and Paragon.
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BUSINESS REVIEW
FOOD ATRIUM
The Food Atrium Division saw steady growth in FY2018 as EBITDA grew 24.3% to S$31.2 million while EBITDA margin rose to 19.9% from 16.8% a year ago. Revenue grew 5.1% to $156.9 million from S$149.3 million in FY2017, largely on the back of lower stall vacancies and stronger same-store sales growth momentum during the year.
F I N A N C I A L H I G H L I G H T S
H I G H L I G H T S I N F Y 2 0 1 8
KEY INITIATIVES
Food Republic Singapore celebrated its 13-year anniversary with a number of key activities during the year.
A proud advocate of our Singapore heritage, Food Republic, together with the BreadTalk Group and Buzzi Nook, sponsored the National Day Parade 2018 for the first time. In conjunction with the sponsorship, Food Republic also ran a contest on Instagram for diners to submit pictures
of dishes from Food Republic that best represent Singapore.
In October, Food Republic collaborated with One FM 91.3 to celebrate its official anniversary at its flagship outlet in Wisma Atria. The celebrations also included an island-wide lucky draw for our customers.
During the year, Food Republic premiered a new mobile application – FR Rewards, the first-of-its- kind app by a food atrium in Singapore that offers a loyalty programme and cashless payment options. The app features a “Scan to Pay” function at the stalls and an “Order Ahead” takeaway
FINANCIAL OVERVIEW
Revenue and EBITDA (S$’m)
Revenue Mix by Geographical Segments
FY2018
FY201725.1
31.2
149.3
156.9
Mainland China
Singapore
Taiwan
Southeast Asia
Hong Kong33%
42%
14%
5% 6%
EBITDA (S$’m)Revenue (S$’m)
BREADTALK GROUP34.
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OUTLETS
In 2018, we opened another Food Republic in Shenzhen, Mainland China, and closed our only outlet in Hangzhou.
As Food Republic continues to gain popularity in Hong Kong with its diverse choices of local and Asian favourite street foods, we opened another outlet during the year.
We also further expanded our global footprint with the opening of our first outlet in Cambodia.
In line with our strategy of operating smaller store formats in shopping malls, we opened three Direct Operated Restaurants (DOR) during the year. As a result, the Division now operates five DORs under the “Sergeant Kitchen” brand, which is a mini restaurant concept specialising in chicken rice. Going forward, Food Atrium plans to further expand this smaller store concept to a wider market.
option that allows customers to beat long queues at the food stalls. As at end-December, the app had been downloaded more than 20,000 times within just four months of its launch.
Keeping pace with consumer trends, Food Republic also launched a Go Green campaign in Singapore to reduce plastic waste. In conjunction with World Environment Day in June, customers were able to purchase an exclusive gold thermal flask for just S$1 with any purchase of coffee or tea at the drinks stall. In addition, customers also enjoyed 10% off their hot drinks for their next purchase within the same month when they utilised the flask. The discount was also extended to other food stalls within Food Republic to reward customers who brought their own containers for takeaways. Spurred on by the positive response from this campaign, Food Republic did a second run of the campaign from September to December 2018, with customers entitled to a discount of 10% off all hot coffee or tea purchases when they used their own flask.
In the second quarter of 2018, Food Republic Singapore also launched a new website with a refreshed look and mobile-friendly features. We will be rolling out the new site in other territories to ensure a more unified look and alignment with brand standards.
OUTLET BY GEOGRAPHY
SINGAPORE
14MAINLAND CHINA
29HONG KONG
6TAIWAN
3SOUTHEAST ASIA
8
OUTLET MOVEMENT
OPENED
6CLOSED
1AS AT END FY2018
60
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BUSINESS REVIEW
RESTAURANT
The Restaurant Division rounded off the year with an 8.2% increase in revenue to S$152.3 million, largely attributed to higher contributions from an enlarged portfolio. EBITDA declined 6.6% to S$28.1 million on the back of higher start-up expenses associated with the opening of the Group’s inaugural Din Tai Fung restaurant in the United Kingdom. Consequently, EBITDA margin declined to 18.5% compared to 21.4% in FY2017.
F I N A N C I A L H I G H L I G H T S
H I G H L I G H T S I N F Y 2 0 1 8
GLOBAL FOOTPRINT EXPANSION
The BreadTalk Group achieved a significant milestone in 2018 with its foray into the European market by opening the first Din Tai Fung restaurant in the heart of London, United Kingdom. Taking prime position in the trendy Covent Garden – the West End of London renowned for its eclectic fashion, shopping options, entertainment and award-winning dining choices – the flagship
OUTLET BY GEOGRAPHY
SINGAPORE
21THAILAND
6UNITED KINGDOM
1
OUTLET MOVEMENT
OPENED
4CLOSED
1AS AT END FY2018
28
FINANCIAL OVERVIEW
Revenue and EBITDA (S$’m)
Revenue Mix by Geographical Segments
FY2018
FY201730.1
28.1
140.7
152.3
Singapore
United Kingdom
Thailand
89%
10% 1%
EBITDA (S$’m)Revenue (S$’m)
BREADTALK GROUP36.
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2018. The brand made it into Ctrip’s inaugural overseas Ctrip Gourmet List 2018. Ctrip is China’s largest online travel platform that boasts an approximate 300 million Chinese users. Additionally, the Din Tai Fung restaurants at Paragon, Chinatown Point and Suntec City also received the Meituan Dianping’s 2018 Customer Review Awards.
Din Tai Fung was also a proud recipient of the Reader’s Digest Trusted Brand, Gold Award for the fifth consecutive year, in recognition of the brand’s unwavering commitment in delivering quality cuisine and service excellence.
KEY ACTIVITIES
Harvest to Hand – Revealing Din Tai Fung’s Best Practices
In celebration of its 15th anniversary in Singapore, the brand launched its “Harvest to Hand” video campaign, which showcased the laborious farm-to-table process behind one of the brand’s signature dishes- the dou miao. The campaign provided viewers with a rare behind-the-scenes look into Din Tai Fung’s food cultivation and preparation processes, which are guided by its core values of precision and culinary excellence. In addition, the brand also collaborated with EVA Air to give away a pair of Business Class flight tickets to Taipei where they were hosted at Din Tai Fung’s very first restaurant located at Xinyi District.
Culinary Bootcamp by Celebrity Chef Eric Teo
In line with its focus on staff growth and retention, selected Din Tai Fung chefs were also treated to a three-day exclusive Culinary Bootcamp. Din Tai Fung Chefs experienced a full demonstration of European cuisine and participated in a Western Culinary Cook-off which culminated in a fine dining experience at an Italian Restaurant.
A participant from the Bootcamp added “We’re exposed to cuisine culinary as part of the nature of our jobs so it’s refreshing to attend this Bootcamp and acquire new skills. Kittanu Suriyawachirachai Grade 4 Dian Xin Chef with Din Tai Fung said.”
Inaugural Staff Lounge & Newly Launched Staff Benefits
Our success over the years would not have been possible without the hard work of our valued employees. In recognition of their contributions, the first Din Tai Fung Staff Lounge opened its doors in October 2018.
Located in the heart of the bustling Orchard Road precinct, the lounge caters to our front-line staff at Paragon and Wisma Atria. The 1,550 square foot space is furnished with four bento dispensers that provide staff with meals on-demand. Boasting a myriad of cuisines in over 60 bento combinations, staff can choose from three bento selections daily. The bento options are varied on a daily basis to ensure that staff enjoy a wide variety of different meals.
In conjunction with the official launch of the Staff Lounge in January 2019, a new work schedule has been put in place to encourage better work-life balance amongst front-liners. A permanent five-day work week has been implemented, replacing the previous alternate five/six-day work week.
In addition, the brand has also tied up with the Singapore Association of the Visually Handicapped (SAVH) to provide island-wide massage services to all restaurant employees.
restaurant opened to much fanfare on 5 December.
The two-storey restaurant sits up to 250 and features the brand’s signature open-kitchen concept where customers can witness world-class dian xin chefs in action, as well as the Group’s first in-house cocktail bar serving Taiwan-inspired cocktails and traditional Chinese tea. 2018 also marked Din Tai Fung’s 15th successful year in delighting consumers in the Singapore market and seventh year in Thailand. The brand currently has 22 restaurants in Singapore with the relocation of the Marina Bay Sands’ restaurant in Q1 2019 and is expecting to open another three more restaurants in 2019.
Din Tai Fung continues to expand in Thailand, closing the year with a total of six restaurants, up from four the previous year. One new restaurant opened in Ei8ht Thonglor in January, one of the trendiest neighbourhoods in central Bangkok known for its bustling entertainment and night life scene, while the second restaurant is located in CentralPlaza Pinklao, one of the largest shopping malls in Bangkok, which opened in December.
AWARDS
Over the years, Din Tai Fung has become synonymous with uncompromising service quality, firmly establishing itself as an exemplar in retail service excellence. In recognition of its achievements in this area, the brand is proud to have three Gold Award recipients and 21 Silver Award recipients at the 2018 Excellent Service Award (EXSA), a widely recognised national award supported by SPRING Singapore that honours service excellence. This is the second consecutive year in which the brand has received the prestigious award.
Reflecting its popularity with Chinese visitors, Din Tai Fung Singapore received two Chinese accolades in
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BUSINESS REVIEW
4ORTH FOOD CONCEPTS
The 4orth Food Concepts Division registered a 80.3% growth in revenue to S$14.2 million in FY2018. On the back of higher pre-opening expenses incurred in relation to the opening of new outlets during the year, the Division posted an EBITDA loss of S$2.9 million. On a positive note, Sō Ramen has turned in another year of strong performance, contributing positive net profit to the Division.
F I N A N C I A L H I G H L I G H T S
H I G H L I G H T S I N F Y 2 0 1 8
Formed in 2017, the 4orth Food Concepts Division has seen its first full year of operation and successfully identified new growth opportunities for the Group, with encouraging contributions from Sō Ramen in Singapore.
During the year, the Division partnered Song Fa Holdings to open its first Song Fa Bak Kut Teh restaurant
OUTLET BY GEOGRAPHY
SINGAPORE
7MAINLAND CHINA
5
OUTLET MOVEMENT
OPENED
8CLOSED
1AS AT END FY2018
12
FINANCIAL OVERVIEW
Revenue and EBITDA (S$’m)
Revenue Mix by Geographical Segments
FY2018
FY2017
Singapore
Mainland China
(2.9)
14.2
0.5
7.9
61%
39%
EBITDA (S$’m)Revenue (S$’m)
L-R: Mr Yeo Hart Pong, Managing Director, Song Fa Holdings; Mr Henry Chu, Chief Executive Officer, BreadTalk Group; Dr George Quek, Chairman, BreadTalk Group; Mr Eugene Tang, General Manager (Operations), Kerry Centre.
BREADTALK GROUP38.
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The Nayuki brand was launched in Singapore in December with the opening of our inaugural outlet in VivoCity. With its novelty pairing of cheese tea and soft-euro bakes in a trendy lifestyle cafe setting, Nayuki has been a phenomenal success in China, where it has achieved rapid growth in prime locations across China. With its revolutionary approach to the tea-drinking lifestyle, we believe Nayuki will be hit amongst tea-loving Singaporeans. A further three outlets are in the pipeline, as we look to grow the brand to satisfy growing demand in Singapore for this unique tea and bakery cafe concept. Meanwhile, we opened our first TaiGai outlet at NEX mall in Serangoon in September. The brand, which has over 60 outlets in China, is well-known for its popular fruit-blended teas with milk-cheese crowns. With their flavourful and refreshing taste, we are confident that TaiGai’s “Milky Kiss” and “Fruity Milky Kiss” drinks will gain traction in the local specialty tea market. We plan to open another two to three more Nayuki outlets in Singapore in 2019.
in Shanghai, China. The performance of this restaurant has been encouraging and the favourable response from Chinese consumers contributed to average sales of RMB1 million in 2018. Spurred by the positive reception, we opened another two restaurants in Shanghai during the year, as well as our first outlet in Beijing in December.
To further enhance our footprint in the key growth markets of China, we entered into a partnership with Shenzhen Pindao Food & Beverage Management Co Ltd (“Pindao”) to expand the Song Fa Bak Kut Teh brand into Shenzhen and Guangzhou. With Pindao’s established presence in South China, we hope to leverage its strong operational experience in these cities to identify and secure choice locations to support the growth of the brand and penetration in South China. We expect to open in Guangzhou and in Thailand in 2019.
With specialty tea beverages gaining popularity in Southeast Asia, 4orth Food Concepts also partnered Pindao to bring their Nayuki and TaiGai tea brands into Singapore. Both brands have more than 240 stores in 22 major cities including Beijing, Shanghai, Guangzhou and Shenzhen.
Another landmark partnership that we entered into during the year was to bring the well-recognised Wu Pao Chun artisanal bakery chain from Taiwan, China to Singapore and Mainland China. Founded by renowned bread master, Mr Wu Pao Chun, whose long list of accolades includes the 2010 Masters de la Boulangerie and World’s Best Baker in the International Union of Bakers and Confectioners International Competition of Young Bakers, this bakery chain is known for its award-winning “Taiwan Longan with Red Wine Bread” and “Taiwan Litchi Rose Champion Bread”. Our flagship Wu Pao Chun bakery was launched in Shanghai in December, while the inaugural outlet in Singapore is scheduled to open in 2019 at Capitol Piazza. We also plan to open another outlet in Shanghai in 2019.
L-R: Mr Yeo Hart Pong, Managing Director, Song Fa Holdings; Mr Henry Chu, Chief Executive Officer, BreadTalk Group; Dr George Quek, Chairman, BreadTalk Group; Mr Eugene Tang, General Manager (Operations), Kerry Centre.
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INVESTORRELATIONS
BreadTalk Group’s management and Investor Relations (IR) team are committed to building strong relationships with local and overseas investors through good corporate governance practices and sound reporting system.
BreadTalk Group maintains an IR webpage (http://breadtalk.listedcompany.com) where it is the primary source for corporate information, fi nancial results, signifi cant business developments and an avenue for feedback.
We provide both equity and debt institutional investors the opportunity to have a face-to-face interaction with BreadTalk Group’s management during semi-annual results briefi ngs and hold regular one-on-one meetings with sell-side research analysts to keep them abreast of our fi nancial performance and business operations. Currently, we are covered by three research analysts.
The management and IR team engaged 177 investors in 25 one-on-one meetings and conference calls. We also participated in local and overseas roadshows and conferences (one in Hong Kong and two in Singapore).
BreadTalk Group’s market capitalisation as at 28 February 2019 was S$490 million based share price of S$0.87. Total shareholder return over the last fi ve years was 114%, inclusive of dividends, compared to 2% delivered by the Straits Times Index.
SUMMARY OF FY2018 INVESTOR RELATIONS ACTIVITIES
Face-to-face / Tele-conferences Investor Meetings Hosted 25Investors Engaged 177Investor Conferences / Events Attended 3
Coverage by Equity Research Houses Daiwa Capital Markets - Jame Osman DBS Vickers Securities - Alfi e Yeo RHB Research Institute Singapore - Juliana Cai
FY2018 CALENDARDate Description09 Jan Non-deal Roadshow - Pulse of Asia hosted by
DBS Vickers Securities22 Feb FY2017 Results Announcement22 Feb FY2017 Results - Analyst and Media Briefi ng20 Apr Annual General Meeting24 & 25 Apr Non-deal Roadshow in Hong Kong hosted by
DBS Vickers Securities03 May 1Q2018 Results Announcement26 & 27 Jun Non-deal Roadshow - Citi ASEAN C-Suite Investor Conference
2018 hosted by Citibank01 Aug 2Q2018 Results Announcement02 Aug 2Q2018 Results - Analyst and Media Briefi ng05 Nov 3Q2018 Results Announcement
FY2018 CALENDARDate Description19 Feb FY2018 Results Announcement20 Feb FY2018 Results - Analyst and Media Briefi ng20 Feb Non-deal Roadshow hosted by Daiwa Capital Markets22 Apr Annual General MeetingMay* Tentative 1Q2019 Results Announcement25 & 26 Jun Non-deal Roadshow - Citi ASEAN C-Suite Investor Conference
2019 hosted by CitibankAug* Tentative 2Q2019 Results AnnouncementNov* Tentative 3Q2019 Results AnnouncementFeb 20* Tentative FY2019 Results Announcement
* Subject to change, please check http://breadtalk.listedcompany.com for the latest updates
BREADTALK GROUP LIMITED VS STRAITS TIMES INDEX (STI)
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Jan
2014
Apr
201
4
Jul 2
014
Oct
201
4
Jan
2015
Apr
201
5
Jul 2
015
Oct
201
5
Jan
2016
Apr
201
6
Jul 2
016
Oct
201
6
Jan
2017
Apr
201
7
Jul 2
017
Oct
201
7
Jan
2018
Apr
201
8
Jul 2
018
Oct
201
8
Jan
2019
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Straits Times Index
BreadTalk Group Limited
Good corporate
governance practices
Facilitate proactive
communications and engagements
with all stakeholders and
the investment community
Ensure timely and accurate
disclosure of company’s
business model, strategies and performance
OBJECTIVES
BREADTALK GROUP40.
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CORPORATE GOVERNANCE
BreadTalk Group Limited (the “Company”) and its subsidiaries (collectively the “Group”) are committed to set corporate governance practices in place which are in line with the recommendations of the Code of Corporate Governance 2012 (the “Code”) to provide the structure through which the objectives of protection of Shareholders’ interest and enhancement of long-term shareholders’ value are met.
This report sets out the Group’s corporate governance processes and structures that were in place throughout the financial year ended 31 December 2018, with specific reference made to the principles and guidelines of the Code and where appropriate, we have provided explanations for deviations from the Code.
On 6 August 2018, the Monetary Authority of Singapore issued a revised Code of Corporate Governance (the “2018 Code”) and accompanying Practice Guidance. The 2018 Code supersedes and replaces the Code and will apply to Annual Reports covering financial years commencing from 1 January 2019. The Group will review and set out the corporate practices in place to comply with the 2018 Code, where appropriate, in the next Annual Report.
A. BOARD MATTERS
The Board’s Conduct of its Affairs
Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.
The primary function of the Board of Directors (the “Board”) is to protect and enhance long-term value and returns for its Shareholders. Besides carrying out its statutory responsibilities, the Board’s roles include:
Guideline 1.1 of the Code: The Board’s role
1. Providing entrepreneurial leadership, setting strategic directions and overall corporate policies of the Group;
2. Supervising, monitoring and reviewing the performance of the management team;
3. Ensuring the adequacy of internal controls, risk management and periodic reviews of the Group’s financial performance and compliance;
4. Setting the Company’s values and standards (including ethical standards) to meet its obligations to Shareholders and other stakeholders, ensuring that the necessary human resources are in place;
5. Approving the annual budget, major funding proposals, investments and divestment proposals;
6. Assuming responsibility for corporate governance practices; and
7. Approving corporate or financial restructuring, share issuance, dividends and other returns to Shareholders, Interested Person Transactions of a material nature and release of the Group’s results for the first three (3) quarters and full year results.
All Directors objectively discharge their duties and responsibilities at all times as fiduciaries and take decisions in the interests of the Company.
Guideline 1.2 of the Code: Disclosure on directors discharge of duties and responsibilities
ANNUAL REPORT 2018 41.
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CORPORATE GOVERNANCE
To assist in the execution of its responsibilities, the Board is supported by three committees, namely the Audit Committee (the “AC”), Nominating Committee (the “NC”) and the Remuneration Committee (the “RC”) (collectively “Board Committees”). The Board Committees operate within clearly defined terms of reference and they play an important role in ensuring good corporate governance in the Company and within the Group. The terms of reference of the Board Committees are reviewed on a regular basis to ensure their continued relevance.
Guideline 1.3 of the Code: Disclosure on delegation of authority by the Board to Board Committees
Formal Board meetings are held at least four times a year to approve the quarterly and full year results announcements and to oversee the business affairs of the Group. The schedule of all the Board and Board Committees meetings for the calendar year is usually given to all the Directors well in advance. The Board is free to seek clarification and information from Management on all matters within their purview. Ad-hoc meetings are convened at such other times as may be necessary to address any specific significant matters that may arise. Important matters concerning the Group are also put to the Board for its decision by way of written resolutions. Meetings via telephone or video conference are permitted by the Company’s Constitution.
Guideline 1.4 of the Code: Board to meet regularly
Details of the Directors’ attendance at Board and Board Committees meetings held during the financial year ended 31 December 2018 are summarised as follows:
ATTENDANCE AT BOARD AND BOARD COMMITTEES MEETINGS
Name of Director Board AC NC RC
Number of Meetings Held 4 4 1 2
ATTENDANCEDr George Quek Meng Tong 4 4* 1* 2*Ms Katherine Lee Lih Leng 4 4* 1* 2*Mr Oh Eng Lock (1) 2 NA NA NAMr Ong Kian Min 4 4 1 2Mr Chan Soo Sen 4 4 1 2Dr Tan Khee Giap 4 4 1 2Mr Paul Charles Kenny 3 NA NA NA
* By invitation (1) Mr Oh Eng Lock has resigned as the Executive Director on 31 August 2018.
Matters that are specifically reserved to the Board for approval include: Guideline 1.5 of the Code: Matters requiring Board approval
(a) matters involving a conflict of interest for a substantial Shareholder or Director;
(b) material acquisitions and disposal of assets;
(c) corporate or financial restructuring;
(d) share issuances, dividends and other returns to Shareholders;
(e) matters which require Board approval as specified in the Company’s Interested Person Transactions policy; and
(f) substantial expenditures exceeding a prescribed limit.
BREADTALK GROUP42.
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CORPORATE GOVERNANCE
The Company provides a comprehensive orientation programme to familiarise new directors with the Company’s businesses and governance practices, as well as the Group’s history, core values, strategic direction and industry-specific knowledge so as to assimilate them into their new roles.
Guideline 1.6 of the Code: Directors to receive appropriate training
Directors also have the opportunity to visit the Group’s operational facilities and meet with the management team to gain a better understanding of the Group’s business operations. Each Director is provided with an annually updated manual containing Board and Company policies relating to the disclosure of interests in securities and conflicts of interests in transactions involving the Company, prohibitions on dealings in the Company’s securities, as well as restrictions on the disclosure of price sensitive information.
The Directors are also updated regularly with changes to the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Rules, risk management, corporate governance, insider trading and the key changes in the relevant regulatory requirements and financial reporting standards and the relevant laws and regulations to facilitate effective discharge of their fiduciary duties as Board or Board Committees members.
New releases issued by the SGX-ST and Accounting and Corporate Regulatory Authority (“ACRA”) which are relevant to the Directors are circulated to the Board. The Company Secretary informed the Directors of upcoming conferences and seminars relevant to their roles as Directors of the Company. Annually, the external auditors update the AC and the Board on the new and revised financial reporting standards that are applicable to the Company or the Group.
The Directors are encouraged to attend seminars and receive training to improve themselves in the discharge of Directors’ duties and responsibilities. Changes to regulations and accounting standards are monitored closely by the Management. To keep pace with such regulatory changes, the Company provides opportunities for ongoing education and training on Board processes and best practices as well as updates on changes in legislation and financial reporting standards, regulations and guidelines from the SGX-ST Listing Rules that affect the Company and/or the Directors in discharging their duties.
Newly appointed Directors receive appropriate training, if required. The Group provides background information about its history, mission and values to its Directors. In addition, the Management regularly updates and familiarises the Directors on the business activities of the Company during Board meetings.
All Directors are appointed to the Board by way of a formal letter of appointment indicating their roles, obligations, among other matters, duties and responsibilities as member of the Board. There were no new Directors appointed during the financial year ended 31 December 2018.
Guideline 1.7 of the Code: Formal letter of appointment
Board Composition and Guidance
Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% Shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision-making.
The Board currently comprises six (6) members – three (3) Independent Non-Executive Directors, two (2) Executive Directors and one (1) Non-Executive Director. They are as follows:
Guideline 2.1 and 2.2 of the Code: Independence of the Board
ANNUAL REPORT 2018 43.
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CORPORATE GOVERNANCE
Dr George Quek Meng Tong (Chairman)Ms Katherine Lee Lih Leng (Deputy Chairman)Mr Ong Kian Min (Lead Independent Non-Executive Director)Mr Chan Soo Sen (Independent Non-Executive Director)Dr Tan Khee Giap (Independent Non-Executive Director)Mr Paul Charles Kenny (Non-Executive Director)
Presently, the Company is in compliance with Guideline 2.2 of the Code and Rule 210(5)(c) of the Listing Manual of the SGX-ST with three (3) Independent Director on the Board, which makes up half of the Board, while the Chairman, Dr George Quek Meng Tong is part of the Management team and is not considered as an Independent Director. The NC is satisfied that after taking into account the scope and nature of operations of the Group in the year under review, the current Board size is appropriate and effective.
The Board has three (3) Independent Directors whose independence is reviewed by the NC annually. The NC considers an “independent” Director as one who has no relationship with the Company, its related Corporations, its 10% Shareholders or its officers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent judgement of the conduct of the Group’s affairs, and is not a 10% Shareholder, or a partner (with 10% or more stake) or an executive officer, or a director of any for profit business organisation to which the Company or any of its subsidiaries have made or received significant payments (aggregated in excess of S$200,000 per year) in the current or immediate past financial year. Moreover, the Chairman of the NC is not associated, directly or indirectly, with a 10% Shareholder, in current or immediate past financial year to enhance an independent view to the best interests of the Company.
Guideline 2.3 of the Code: Independent Directors
As a result of the NC’s review for financial year ended 31 December 2018, the NC is of the view that the Independent Directors are independent of the Company’s management as contemplated by the Code.
The Board has no dissenting view on the “Chairman’s message” to the shareholders as set out on pages 12 to 13 of this Annual Report for the financial year under review.
In line with Guideline 2.4 of the Code, the NC had conducted a rigorous review on the independence of the Independent Directors, Mr Ong Kian Min (“Mr Ong”) and Mr Chan Soo Sen (“Mr Chan”) and considers them as independent even though they have served on the Board beyond 9 years. The relevant factors that were taken into consideration in determining the independent of Mr Ong and Mr Chan are set out under Principle 4 of page 46 and 47 of this Annual Report.
Guideline 2.4 of the Code: Rigorous Review of Independent Directors
The Board, in view of the nature and scope of business operations, the present Board size and composition facilitates efficient and effective decision-making with a strong independent element.
Guideline 2.5 of the Code: Appropriate Board size
Each Director has been appointed on the strength of his calibre, experience, grasp of corporate strategy and potential to contribute to the Company and its businesses. As each director brings valuable insights from different perspectives vital to the strategic interests of the Company, the Board considers that the Directors possess the necessary competencies to provide Management with a diverse and objective perspective on issues so as to lead and govern the Company effectively.
Guideline 2.6 of the Code: Board to comprise Directors with core competencies
Once a year, a formal session is arranged for the Non-Executive Directors (the “NEDs”) to meet without the presence of Management or Executive Directors to discuss any matters that must be raised privately, for example, the review of the performance of Management. The session is chaired by Mr Ong, the Lead Independent Non-Executive Director, who is also the chairman of the AC and NC. The Lead Independent Non-Executive Director has provided feedback to the Chairman after such meeting.
Guidelines 2.7,2.8 and 3.4 of the Code: Role of NEDs and regular meetings of NEDs
BREADTALK GROUP44.
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The Chairman and Chief Executive Officer
Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.
The Company adopts a dual leadership structure whereby the positions of chairman and chief executive officer are separated. There is a clear division of responsibilities between the Company’s Chairman and the Group’s Chief Executive Officer, which provides a balance of power and authority.
Guideline 3.1 of the Code: The Chairman and chief executive officer should be separate persons
As the Chairman, Dr George Quek Meng Tong is responsible for ensuring Board effectiveness and conduct, as well as the strategic development of the Group in addition to duties and responsibilities which he may, from time to time, be required to assume. The Group’s Chief Executive Officer, Mr Chu Heng Hwee, has overall responsibility of the Group’s operations, organisational effectiveness and implementation of Board policies and strategic decisions.
Guideline 3.2 of the Code: The Chairman’s role
Notwithstanding the above, the Non-Executive and Independent Directors fulfil a pivotal role in corporate accountability. Their presence is particularly important as they provide unbiased and independent views, advice and judgement to take care of the interests, not only of the Company but also of the Shareholders, employees, customers, suppliers and the many communities with which the Company conducts business with. The Board had on 14 August 2006 appointed Mr Ong as the Lead Independent Non-Executive Director to act as an additional channel available to Shareholders.
Guideline 3.3 of the Code: Appoin tment o f Lead Independent Director
Where appropriate, the Lead Independent Director meets periodically with the other Independent Directors without the presence of the other Directors and provides feedback to the Chairman after such meetings.
Board Membership
Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.
The NC comprises the three (3) Independent Non-Executive Directors who have been tasked with the authority and responsibility to devise an appropriate process to review and evaluate the performance of the Board as a whole, as well as for each individual Director on the Board. The chairman of the NC is the Lead Independent Non-Executive Director, who is not a 10% Shareholder or directly associated with a 10% Shareholder.
Guideline 4.1 of the Code: Composition of the NC
The composition of the NC is as follows:
Mr Ong Kian Min – ChairmanMr Chan Soo Sen – MemberDr Tan Khee Giap – Member
The primary responsibilities of the NC under the guidelines of the written Terms of Reference are: Guidelines 4.2: Duties of the NC
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1. To make recommendations to the Board on the appointment of new Executive and Non-Executive Directors, including making recommendations on the composition of the Board generally, and the balance between Executive and Non-Executive Directors appointed to the Board, as well as ensuring there are procedures in place for the selection and appointment of NEDs.
2. To regularly review the Board structure, size and composition and make recommendations to the Board with regard to any adjustments that are deemed necessary.
3. To be responsible for assessing nominees or candidates for appointment or election to the Board, determining whether or not such nominees have the requisite qualifications and whether or not they are independent.
4. To make plans for succession, in particular for the Chairman, the Group’s Chief Executive Officer and other key management personnel.
5. To determine, on an annual basis, if a Director is independent. If the NC determines that a Director, who has one or more of the relationships mentioned under the Code is in fact independent, the NC would disclose in full, the nature of the Director’s relationship and bear responsibility for explaining why he should be considered independent.
6. To recommend Directors who are retiring by rotation to be put forward for re-election.
7. To determine whether or not a Director is able to and has been adequately carrying out his duties as a Director of the Company, particularly where he has multiple board representations and other principal commitments.
8. To be responsible for developing an evaluation mechanism for the performance of the Board, its board committees and Directors; and assessing the effectiveness of the Board as a whole, its board committees and for assessing the contribution of each individual Director to the effectiveness of the Board and disclosing annually, this assessment process.
9. To review the training and professional development programmes for the Board.
The NC is responsible for identifying and recommending new Directors to the Board, after considering the necessary and desirable competencies. In selecting potential new Directors, the NC will seek to identify the competencies required to enable the Board to fulfil its responsibilities. The NC may engage consultants to undertake research on, or assess, candidates applying for new positions on the Board, or to engage such other independent experts, as it considers necessary to carry out its duties and responsibilities. Recommendations for new Directors are put to the Board for its consideration.
Guidelines 4.2 and 4.6: Process of selecting directors
New Directors are appointed by way of a Board resolution following which they are subject to re-election at the next annual general meeting (“AGM”).
All the Directors are required to submit themselves for re-nomination and re-appointment at least once every three (3) years and at least one-third of the Board shall retire from office by rotation and be subject to re-election at every AGM of the Company.
In considering whether an Independent Director who has served on the Board for 9 years is still independent, the Board has taken into consideration the following factors:
Guideline 4.3: Independence of Independent Directors
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1. The considerable amount of experience and wealth of knowledge that the independent director brings to the Company.
2. The attendance and active participation in the proceedings and decision making process of the Board and Board Committees Meetings.
3. Provision of continuity and stability to the new Management at the Board level as the independent director has developed deep insight into the business of the Company and possesses experience and knowledge of the business.
4. The qualification and expertise provides reasonable checks and balances for the Management.
5. The independent director has provided adequate attention and sufficient time has been devoted to the proceedings and business of the Company. He is adequately prepared and responsive and heavily involved in the discussions at the meeting.
6. The independent director provides overall guidance to Management and act as safeguard for the protection of Company’s assets and Shareholders’ interests.
In this regard, the NC with the concurrence of the Board has reviewed the suitability of Mr Ong and Mr Chan being the Independent Directors who have served on the Board beyond 9 years and have determined that Mr Ong and Mr Chan remains independent. Mr Ong and Mr Chan had abstained from voting on any resolution in respect of their own appointment. In addition, the NC is of the view that Mr Ong and Mr Chan are independent (as defined in the Code) and are able to exercise judgement on the corporate affairs of the Group independent of the Management.
Despite some of the Directors having other Board representations, the NC is satisfied that these Directors are able to and have adequately carried out their duties as Directors of the Company. Currently, the Board has not determined the maximum number of listed Board representations which any director may hold. The NC and the Board will review the requirement to determine the maximum number of listed Board representations as and when it deemed fits.
Guidel ine 4.4: Board representations
There is no alternate director being appointed to the Board for the financial year ended 31 December 2018.
Guideline 4.5: Appointment of Alternate Director
The NC has recommended to the Board that Mr Chan Soo Sen and Mr Paul Charles Kenny be nominated for re-election pursuant to Regulation 107 of the Company’s Constitution at the forthcoming AGM. The Board had accepted the NC’s recommendation. Please refer to page 62 to 67 in the Annual Report for the detailed information required pursuant to Rule 720(5) of the Listing Manual of the SGX-ST.
Each member of the NC shall abstain from voting on any resolutions in respect to his nomination as a Director.
The key information regarding Directors such as academic and professional qualifications, Board Committees served, directorships or chairmanships both present and past held over the preceding three years in other listed companies and other major appointments, whether the appointment is executive or non-executive are set out in page 18 to 20 of the Annual Report.
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Board Performance
Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.
While the Code recommends that the NC be responsible for assessing the Board as a whole and also assessing the individual evaluation of each Directors’ contribution, the NC is of the view that it is more appropriate and effective to assess the Board and Board Committees as a whole, bearing in mind that each member of the Board contributes in different way to the success of the Company and Board decisions are made collectively.
Guidelines 5.1 to 5.3 of the Code: Assessing the effectiveness of the Board
The Board has implemented a process for assessing the effectiveness of the Board and the Board Committees as a whole. During the financial year under review, each Director was required to complete a board evaluation form adopted by the NC to assess the overall effectiveness of the Board and Board Committees, which will be collated by the Chairman for review or discussion. The results of the Board and Board Committees evaluation exercise were considered by the NC which then makes recommendations to the Board aimed at helping the Board to discharge its duties more effectively. The appraisal process focused on a set of performance criteria which includes the evaluation of the size and composition of the Board, the Board’s access to information, Board processes and accountability, Board performance in relation to discharging its principal responsibilities and the Directors’ standards of conduct. Following the review, the Board is of the view that the Board and its Board Committees operate effectively and each Director is contributing to the overall effectiveness of the Board. No external facilitator was used during the evaluation process.
The Board and the NC had endeavored to ensure that Directors appointed to the Board possess the relevant experience, knowledge and expertise critical to the Group’s business.
Although the Directors are not evaluated individually, the factors taken into consideration with regards to the re-nomination of Directors for the financial year ended 31 December 2018 are based on their attendance and contributions made at the Board and Board Committees meetings.
Access to Information
Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.
The Board receives complete and adequate information on an on-going basis. The Management provides the Chairman and Deputy Chairman with monthly management accounts and the rest of the Board members with quarterly management accounts. The agenda for Board meetings is prepared in consultation with the Chairman and it will be circulated at least one (1) week in advance to Board members of each meeting.
Guideline 6.2 of the Code: Provision of information to the Board
Furthermore, the Board members have separate and independent access to the Company Secretary and key management personnel, and there is no restriction of access to the senior Management team of the Company or the Group at all times in carrying out its duties.
Guidelines 6.1 and 6.3 of the Code: Access to the Management and role of the Company Secretary
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The Company Secretaries or their representatives attends all Board and Board Committees meetings and prepares minutes of Board and Board Committees meetings and assists the Chairman in ensuring that Board procedures are followed and reviewed in accordance with the Company’s Constitution so that the Board functions effectively and the relevant rules and regulations applicable to the Company are complied with. The Company Secretaries or their representatives’ role is to advise the Board on all governance matters, ensuring that legal and regulatory requirements as well as Board policies and procedures are complied with. The appointment and removal of the Company Secretaries are subjected to the approval of the Board.
Guideline 6.4 of the Code: Appointment and removal of company secretary
Where decisions to be taken by the Board require specialised knowledge or expert opinion, the Board takes independent professional advice as and when it is necessary to enable it or the Independent Directors to discharge the responsibilities effectively.
Guideline 6.5 of the Code: Access to independent professional advice
B. REMUNERATION MATTERS
Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
The RC is established for the purpose of ensuring that there is a formal and transparent procedure for fixing the remuneration packages of individual Directors, comprises the three (3) Independent Non-Executive Directors. The chairman of the RC is an Independent Non-Executive Director.
Guideline 7.1 of the Code: The RC is to consist entirely of NEDs and the majority, including the RC chairman, must be independent
The RC comprises three (3) Independent Directors as follows:
Mr Chan Soo Sen – ChairmanDr Tan Khee Giap – MemberMr Ong Kian Min – Member
The overriding principle is that no Director should be involved in deciding his own remuneration. The RC has adopted written terms of reference that defines its membership, roles, functions and administration.
The primary responsibilities of the RC are as follows: Guideline 7.2 of the Code: The RC’s responsibilities
1. To review and recommend to the Board in consultation with the Chairman of the Board, a framework for remuneration and to determine the specific remuneration packages and terms of employment for each of the executive Directors and key management personnel or divisional CEOs (those reporting directly to the Chairman or the Group’s Chief Executive Officer) and those employees related to the Executive Directors and controlling Shareholders of the Group.
2. To review and recommend to the Board in consultation with the Chairman of the Board, any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection therewith.
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3. To administer the BreadTalk Group Limited Restricted Share Grant Plan 2018 (the “RSG Plan”) and shall have all the powers as set out in the Rules of the RSG Plan.
4. To carry out its duties in the manner that it deems expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board from time to time.
5. As part of its review, the RC shall ensure that:
(i) all aspects of remuneration including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind should be covered.
(ii) the remuneration packages should be comparable within the industry and comparable companies, and shall include a performance-related element coupled with appropriate and meaningful measures of assessing individual executive Directors’ and key management personnel’ or divisional CEOs’ performance.
(iii) the remuneration package of employees related to Executive Directors and controlling Shareholders are in line with the Group’s staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibility.
The RC will seek independent expert advice inside and/or outside the Company on the remuneration of executive directors and key management personnel or divisional CEOs (those reporting directly to the Chairman or the Group’s Chief Executive Officer), and those employees related to the executive directors and controlling Shareholders of the Group, if necessary. The Company has engaged Mercer (Singapore) Pte. Ltd. (“Mercer”) as its remuneration consultant during financial year ended 31 December 2018. Mercer does not have any relationships with the Company which would affect the independence and objectivity of Mercer for review of the remuneration framework.
Guideline 7.3 of the Code: Access to expert advice
The RC will review the Company’s obligations arising in the event of termination of the Executive Directors’ and key management personnel’s contracts of service and ensure that such contracts of service contain fair and reasonable termination clauses which are not overly generous. The RC aims to be fair and avoid rewarding poor performance.
Guideline 7.4 of the Code: Termination clauses
Level and Mix of Remuneration
Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to success fully manage the company. However, companies should avoid paying more than is necessary for this purpose.
The Company advocates a performance based remuneration system for executive Directors and key management personnel that is flexible and responsive to the market, comprising a base salary and other fixed allowances, as well as variable performance bonus and participation in an employee share award or scheme based on the Company’s performance, linking it to the individual’s performance.
Guidelines 8.1 to 8.4 of the Code: RC to recommend remuneration of Directors and review remuneration of key executives
In determining such remuneration packages, the RC will ensure that they are adequate by considering, in consultation with the Chairman or the Group’s Chief Executive Officer amongst other things, the respective individuals’ responsibilities, skills, expertise and contribution to the Company’s performance, and whether they are competitive and sufficient to ensure that the Company is able to attract and retain the best available executive talent, without being excessively generous.
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At the Extraordinary General Meeting (“EGM”) held on 20 April 2018, the Shareholders of the Company had approved the adoption of the new RSG Plan and new Employee Share Option Scheme. Under the RSG Plan and any other share based schemes of the Company, the aggregate number of shares to be issued shall not exceed 15% of the total issued share capital, excluding treasury shares of the Company and will be in force for a maximum period of ten (10) years commencing 20 April 2018.
The award of shares under RSG Plan can be either performance based awards or time based awards. For performance based awards, entitled participants will be allotted fully paid shares upon satisfactory achievement of pre-determined performance targets. As for time based awards, entitled participants will be allotted fully paid shares upon satisfactory completion of time based service conditions, that is, after the participant has served the Company or as the case may be, the relevant associated company, for a specified duration, as may be determined by the RC.
The adoption of RSG Plan is consistent with the continuing efforts of the existing Scheme in rewarding, retaining and motivating employees to achieve superior performance standards while affording the Company greater flexibility to align the interests of employees with those of the Shareholders. To date, there is no share issue under its RSG Plan.
The RC has adopted a framework which consists of a base fee to remunerate Non-Executive Directors based on their appointments and roles in the respective Board Committees, as well as the fees paid in comparable companies. Fees for the Non-Executive Directors will be tabled at the forthcoming 2018 AGM for Shareholders’ approval.
Disclosure on Remuneration
Principle 9: Each company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.
A breakdown showing the level and mix of each Director’s and key Management Personnel’s remuneration for the year ended 31 December 2018 is set out below:
Guidelines 9.1 to 9.6 of the Code: Remuneration of Directors, key management personnel and related employees
REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Name of Director Salary(1) Bonus /
Profit-Sharing Share-based Compensation
Benefits-In-Kind
Directors’ Fees(3) Total
% % % % % %
Above S$1,000,000Dr George Quek Meng Tong 50.4 47.1 – 2.5 – 100.0S$750,000 to below S$1,000,000 Oh Eng Lock(2) 22.1 77.3 0.6 – – 100.0S$500,000 to below S$750,000Katherine Lee Lih Leng 51.6 48.4 – – – 100.0Below S$100,000Ong Kian Min – – – – 100.0 100.0Chan Soo Sen – – – – 100.0 100.0Dr Tan Khee Giap – – – – 100.0 100.0Paul Charles Kenny – – – – – –
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Name of Key Management Personnel(4) (who are not Directors) Designation Salary(1)
Bonus / Profit-Sharing
Share-based Compensation
Benefits-In-Kind Total
% % % % %
Above S$1,000,000
Chu Heng Hwee Group CEO 49.1 41.6 9.3 – 100.0
S$750,000 to below S$1,000,000
Cheng William CEO, Restaurant Division
34.9 63.0 2.1 – 100.0
Chan Ying Jian Group CFO 55.6 41.9 2.4 0.1 100.0
S$500,000 to below S$750,000
Jenson Ong Chin Hock CEO, Food Atrium Division
68.4 31.4 0.2 – 100.0
Tan Aik Peng CEO, Bakery Division
67.9 30.2 1.9 – 100.0
Notes:
(1) Salary is inclusive of fixed allowance and CPF contribution.(2) Mr Oh Eng Lock resigned as the Executive Director on 31 August 2018.(3) Directors’ fees will be paid after approval is obtained from Shareholders at the forthcoming 2018 AGM.(4) The Group has identified four key management personnel (who are not directors or the CEO) for the financial
year ended 31 December 2018.
The total remuneration of each Director and key management personnel has not been disclosed in dollar terms given the sensitivity of remuneration matters and to maintain the confidentiality of the remuneration packages of these Directors.
The total remuneration of the top four key management personnel (who are not directors or the CEO) is S$2,882,445 for the financial year ended 31 December 2018.
There were no terminations, retirement or post-employment benefits granted to Directors, the CEO and key management personnel other than the standard contractual notice period termination payment in lieu of service for the financial year ended 31 December 2018.
Immediate Family Member of Directors or Substantial Shareholders
Mr Frankie Quek Swee Heng is the brother of Dr George Quek Meng Tong and whose remuneration exceeds S$50,000 in the financial year ended 31 December 2018. The basis for determining the compensation of our related employees is the same as the basis of determining the compensation of other unrelated employees.
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Details of remuneration paid to the immediate family member of Directors or substantial Shareholders for the financial year ended 31 December 2018 is set out below:
Name of Immediate Family Member Salary
Bonus / Share-based Compensation Benefits-In-Kind Total Profit-Sharing
% % % % %
S$350,000 to below S$400,000
Mr Frankie Quek Swee Heng 79.3 18.3 2.4 – 100
Save as disclosed, no other employee whose remuneration exceeded S$50,000 during the year is an immediate family member of any of the members of the Board.
C. ACCOUNTABILITY AND AUDIT
Accountability
Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.
The Board has a responsibility to present a fair assessment of the Group’s position, including the prospects of the Group in all announcements (including financial performance reports) made to the public via SGXNet and the annual report to Shareholders, as required by the SGX-ST.
Guideline 10.1 of the Code: Board’s responsibility to the public
The Board has also taken steps to ensure compliance with legislative and regulatory requirements. In line with the requirements under the rules of the SGX-ST, the Board provides a negative assurance statement to the Shareholders in respect of the interim financial statements. For the financial year under review, the Group CEO and Group CFO have provided assurance to the Board on the integrity of the Group’s financial statements.
Guidelines 10.2 and 10.3 of the Code: Management’s responsibility to the Board
To enable effective monitoring and decision-making by the Board, Management provides the Board with a continual flow of relevant information on a timely basis as well as quarterly management accounts of the Group. Particularly, prior to the release of quarterly and full year results to the public, Management will present the Group’s financial performance together with explanatory details of its operations to the AC, which will review and recommend the same to the Board for approval and authorisation for the release of the results.
Risk Management and Internal Controls
Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risk which the Board is willing to take in achieving its strategic objectives.
The Group has established a risk identification and management framework. With the said framework, the Group identifies key risks and undertakes appropriate measures to control and mitigate these risks. The ownership of these risks lies with the respective department and business unit heads with stewardship residing with the Board. Action plans to manage the risks are continually being monitored and refined by Management and the Board.
Guideline 11.4 of the Code: Board overseeing the Company’s risk management framework and policies.
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The Internal Auditors carry out internal audit on the system of internal controls based on the approved internal audit plan and reports the findings to the AC. The Group’s External Auditors, Ernst & Young LLP have also carried out, in the course of their statutory audit, a review of the Group’s material internal controls. Material non-compliance and internal control weaknesses and recommendations for improvements noted during their audit were reported to the AC. The AC has reviewed the effectiveness of the actions taken by the management on the recommendations made by the Internal and External Auditors in this respect.
Guideline 11.2 of the Code: Board to review adequacy of the financial, operational and compliance controls and risk management policies.
The Board has also received assurance from the Group CEO and the Group CFO that (i) the financial records have been properly maintained and the financial statements provide a true and fair view of the Company’s operations and finances; and (ii) the Company risk management and internal control systems in place are adequate and effective.
Guideline 11.3 of the Code: Board to comment on the adequacy of internal controls
Based on the internal control established and maintained by the Group, work performed by the internal and external auditors and reviews performed by management, various Board committees and the Board, the Board, with the concurrence of the AC, is of the opinion that the Group’s internal controls, addressing financial, operational, compliance, information technology and risk management system, were adequate and effective for the financial year ended 31 December 2018.
Audit Committee
Principle 12: The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.
The role of the AC is to assist the Board in the execution of its corporate governance responsibilities within the Board’s established references and requirements. The financial statements, accounting policies and system of internal accounting controls are responsibilities that fall under the ambit of the AC. The AC has its set of written terms of reference defining its scope of authority and further details of its major functions are set out below and also in the Report of the Directors.
Guidelines 12.1, 12.2 and 12.9 of the Code: Board to establish AC and composition of AC
The AC comprises three (3) members who are all Independent Non-Executive Directors. The chairman of the AC is an Independent Non-Executive Director.
The members of the AC are:
Mr Ong Kian Min – ChairmanMr Chan Soo Sen – MemberDr Tan Khee Giap – Member
The members of the AC including the AC Chairman have recent and relevant expertise or experience in accounting and financial management, and are qualified to discharge the AC’s responsibilities. The AC members keep abreast of changes to accounting standards and issues which have a direct impact on financial statements. None of the members of the AC is a former partner or director of the Company’s present auditors.
In performing its functions, the AC confirms that it has explicit authority to investigate any matter within its terms of reference, has full access to and co-operation from the Management, and has been given full discretion to invite any Director or executive officer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly.
Guideline 12.3 of the Code: The AC’s authority
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The main functions of the AC are as follows: Guideline 12.4 of the Code: Duties of the AC
1. Reviewing the audit plan of the Company’s external auditors and adequacy of the system of internal accounting control;
2. Discussing and reviewing the external auditors’ reports;
3. Reviewing significant financial reporting issues and judgements so as to ensure the integrity of the financial statements and any formal announcements relating to the Company’s or Group’s financial performance;
4. Reviewing and recommending the nomination of the external auditors for appointment or re-appointment;
5. Reviewing the Interested Person Transactions;
6. Reviewing the scope and results of the internal audit procedures;
7. Reviewing the internal audit programme and the adequacy and effectiveness of the Company’s internal audit function, as well as to ensure co-ordination between the internal and external auditors and Management; and
8. Reviewing the remuneration packages of the employees who are related to the Directors or substantial Shareholders.
The AC held four (4) meetings during the financial year under review. It has reviewed the financial statements of the Group for the purpose of the first three (3) quarters and annual results release before they were submitted to the Board for approval. It has also met with the Company’s internal and external auditors (without the presence of Management) to review their audit plans and results, and has separate and independent access to the auditors. The AC had reviewed the non-audit services provided by the external auditors, and is of the opinion that the provision of such services does not affect their independence. The aggregate amount of fees paid to the external auditors and a breakdown of fees paid in total for audit and non-audit services are set out on page 116 of this Annual Report.
Guidelines 12.5 and 12.6 of the Code: Meeting with auditors and review of their independence
The Group has complied with Rules 712 and Rules 715 or 716 of the Listing Manual issued by SGX-ST in relation to its auditors. As required by Rule 716 of the Listing Manual, the AC and the Board of the Company have satisfied themselves that the appointment of different auditors for its subsidiaries would not compromise the standard and effectiveness of the audit of the Group.
The AC is kept updated annually or from time to time on any changes to the accounting and financial reporting standards by the EA. No former partner or director of the Company’s existing auditing firm has acted as a member of the AC.
Guideline 12.9
In line with the recommendations by ACRA, Monetary Authority of Singapore and SGX that the AC can help to improve transparency and enhance the quality of corporate reporting by providing a commentary on key audit matters (“KAM”).
The AC considered the KAM presented by the external auditors together with Management. The AC reviewed the KAM and concurred and agreed with the external auditors and Management on their assessment, judgements and estimates on the significant matters reported by the external auditors.
ANNUAL REPORT 2018 55.
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Where there is any suspected fraud or irregularity, or failure of internal controls, or infringement of any Singapore law, rule or regulation which has a material impact on the Company’s operating results, the AC will commission and review the findings of internal investigations into the matters. Endorsed by the AC, the Company has in place a whistle-blowing framework (“Policy”) which provides an avenue for employees of, as well as other external parties who have business relations with, the Group to access the AC chairman to raise concerns about improprieties and independent investigation of such matters by the AC. Details of the Policy are set out below.
Guidelines 12.7 and 12.8 of the Code: Whistle-blowing arrangements
The Policy
The Group maintains an independent, confidential channel through which both employees and external parties who have business relations with the Group and include, amongst others, customers, suppliers and contractors may, in good faith and without reprisal, raise concerns about suspected acts of misconduct or non-compliance to the AC, which oversees the Policy. The Group’s ethos of sound corporate governance underlies the Group’s whistle-blowing policy that aims to encourage the disclosure of inappropriate conduct, which in turn allows the Group to investigate and resolve them as required. The Policy undergoes annual review to ensure continual effectiveness, and may only be amended upon approval by the AC. Relevant information on this policy has been conveyed to all employees.
Reportable Conduct
Generally, the Policy covers questionable financial reporting or accounting practices, illegal or criminal acts and failures to comply with regulatory or legal obligations. Examples of reportable misconduct or non-compliance include, among others:
1. Use of funds for any illegal, improper or unethical purpose;
2. Tampering with, or destroying, any accounting or audit-related records in any medium or format except as otherwise permitted or required by the Group’s records retention policy;
3. Fraud or deliberate errors in the preparation, evaluation, review or audit of the Group’s financial statements, and/or recording and maintaining of financial records (such as overstating expense reports, preparing erroneous invoices, misstating inventory records or describing an expenditure as being made for one purpose when it was in fact for another);
4. Deficiencies in or non-compliance with the internal controls for example, circumventing review and approval processes;
5. Unsafe work practices; and/or
6. Concealing or attempting to conceal information related to any of the above.
However, the Policy is not intended to address issues such as personal grievances or feedback to improve policies or procedures, which are addressed through separate, existing measures. Non-reportable matters under this Policy include, among others:
1. Work scheduling, required hours of work, compensation of work and staff transfer;
2. Enforcement of existing Human Resource Policies and requirements; and/or
3. Theft and/or fraud by customers.
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Functions and Procedure
While the AC is responsible for overseeing the Policy, it may where necessary delegate certain duties to appropriate parties, such as work involving administration or investigation. The AC chairman shall receive and conduct a preliminary review of complaints before escalating valid reports to the AC. A Complaints Register is maintained to record all complaints and remedial action taken, if any. The Complaints Register is also available for inspection upon request, subject to approval by the Chairman of the AC.
Parties who wish to report suspected acts of misconduct or non-compliance may submit reports directly to the AC chairman by way of email at whistleblow@breadtalk.com. A confidential email account has been set up for this purpose. The report must contain: the specific concern, reasons for this concern, and the background/history of the concern, including relevant dates. The AC will review the complaint and may investigate it further and take appropriate action, unless it decides that no further action is required.
While the Group encourages whistleblowers to disclose their identities when submitting complaints, the Group shall endeavor to keep all identities confidential. However, this is subject to, among others, legal or regulatory requirements, court orders or directions for disclosure.
Internal Audit
Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.
The Group has outsourced certain internal audit works to Foo Kon Tan Advisory Services Pte Ltd. Guidelines 13.1 to 13.5 of the Code: IA to report to AC chairman
The Internal Auditors are guided by the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The AC reviews the scope of the internal audit function, internal audit findings and the internal audit plan.
The Board recognises that it is responsible for maintaining a system of internal control to safeguard Shareholders’ investments and the Company’s businesses and assets while the Management is responsible for establishing and implementing the internal control procedures in a timely and appropriate manner. The role of the Internal Auditors is to assist the AC in ensuring that the controls are effective and functioning as intended to undertake investigations as directed by the AC and to conduct regular in-depth audits of high risk areas.
The AC approves the hiring, removal, evaluation and compensation of the internal auditor, who has unfettered access to all the Company’s documents, records, properties and personnel, including access to the AC. The AC is satisfied that the internal audit function is (i) independent, (ii) staffed by suitably qualified and experienced professionals with the relevant experience and (iii) has adequate resources to perform its function effectively.
The AC reviews annually the independence, adequacy and effectiveness of the internal audit function of the Company.
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D. SHAREHOLDER RIGHTS AND RESPONSIBILITIES
Shareholder Rights
Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.
The Company does not practise selective disclosure. In line with the continuous obligations of the Company under the SGX-ST Listing Manual and the Companies Act, Chapter 50, the Board’s policy is that all Shareholders should equally and on a timely basis be informed of all major developments that impact the Group via SGXNet.
Guidelines 14.1 to 14.3 of the Code: Company to treat all shareholders fairly and equitably
Shareholders are informed of general meetings through the announcements released to the SGXNet and notices contained in the Annual Report or circulars sent to all Shareholders. These notices are also advertised in a national newspaper. All Shareholders are entitled to attend the general meetings and are provided the opportunity to participate in the general meetings. If any Shareholder is unable to attend, he/she is allowed to appoint such number of proxies as required to vote on his/her behalf at the general meeting through proxy forms sent in advance. Shareholders are also informed on the procedures for the poll voting at the general meetings.
On 3 January 2016, the legislation was amended, among other things to allow certain members, defined as “Relevant Intermediary” to attend and participate in general meetings without being constrained by the two-proxy requirement. Relevant Intermediary includes corporations holding licenses in providing nominee and custodial services and CPF Board which purchases shares on behalf of the CPF investors.
Communication with Shareholders
Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.
The Company believes in high standards of transparent corporate disclosure and is committed to disclose to its Shareholder, the information in a timely and fair manner via SGXNet. Where there is inadvertent disclosure made to a selected Group, the Company will make the same disclosure publicly to all others as soon as practicable. Communication is made through:–
Guidelines 15.1 to 15.4 of the Code: Regular, effective and fair communications with shareholders
• Annual Report prepared and issued to all Shareholders. The Board ensures that the annual report includes all relevant information about the Company and the Group, including future developments, if any, and other disclosures required by the Companies Act, Chapter 50 and Singapore Financial Reporting Standards;
• Quarterly announcements containing a summary of the financial information and affairs of the Group for that period;
• Press releases on major developments of the Group; and
• Notices of explanatory memoranda for AGMs and EGM. The notice of AGM and EGM are also advertised in a national newspaper.
BREADTALK GROUP58.
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All material information on the performance and development of the Group and of the Company is disclosed in a timely, accurate and comprehensive manner through SGXNet, press releases and the Company’s website. The Company does not practice selective disclosure of material information. All materials on the quarterly, half yearly and full year financial results are available on the Company’s website – www.breadtalk.com. The comprehensive website, which is updated regularly, also contains various others investor-related information on the Company which serves as an important resource for investors.
By supplying Shareholders with reliable and timely information, the Company is able to strengthen the relationship with its Shareholders based on trust and accessibility. The Company’s investor relations (IR) team is led by the Group Chief Financial Officer who is responsible for integrating finance, accounting, corporate communications, legal and compliance to enable effective communication between the Company and investors. The Company conducts briefings to present its financial results to the media and analysts. Outside of the financial announcement periods, when necessary and appropriate, the IR team will meet investors and analysts who wish to seek a better understanding of the Group’s business and operations. This effort enables the Company to solicit feedback from the investment community on a range of strategic and topical issues which provide valuable insights to the Company from investors’ views. For detailed IR events and calendar, please refer to page 40 of the Annual Report.
The Company does not practice selective disclosure. Price-sensitive information is first publicly released through SGXNet, before the Company meets with any investors or analysts. All Shareholders of the Company will receive the Annual Report with an accompanying notice of AGM by post. The notice of AGM is also published in the newspaper within the mandatory period, the AGM of which is to be held within four months after the close of the financial year.
The Group does not have a formal dividend policy at present. The form, frequency and amount of dividends declared each year will take into consideration the Group’s profit growth, cash position, positive cash flow generated from operations, projected capital requirements for business growth and other factors as the Board may deem appropriate.
The Board has recommended a final dividend of 1.0 cents per share for the financial year ended 31 December 2018 which is subject to the Shareholders’ approval at the forthcoming AGM of the Company.
Conduct of Shareholder Meeting
Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.
Notices of general meetings are despatched to Shareholders, together with the annual report or circulars within the time notice period as prescribed by the regulations. At general meetings, Shareholders are given opportunities to voice their views and direct their questions to Directors or Management regarding the Company. The Chairman of the Board, members of the AC, NC and/or RC are present and available to address questions at general meetings. The External Auditors are also present to assist the Board.
Guideline 16.3 of the Code: Chairman and external auditors present at general meetings
In preparation for the annual general meeting, Shareholders are encouraged to refer to the SGX’s the investor guides, namely ‘An Investor’s Guide To Reading Annual Reports’ and ‘An Investor’s Guide To Preparing For Annual General Meetings’. The guides, in both English and Chinese, are available at the SGX website via this link:
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http://www.sgx.com/wps/wcm/connect/sgx_en/home/individual_investor/investor_guide
The Company has in place an investor relations programme to keep investors informed of material developments in the Company’s business and affairs beyond that which is prescribed, but without prejudicing the business interests of the Company.
The Company’s Constitution do not restrict the number of proxies a Shareholder can appoint to attend and vote on his/her behalf at all general meetings. There are separate resolutions at the general meetings for each distinct issue. The Board and Management are on hand at general meetings to address questions by Shareholders.
Guideline 16.1 to 16.2 and 16.4 of the Code: Shareholders should be allowed to vote in absentia, avoid bundling of resolutions and limit on proxies.
Minutes of general meetings are prepared and made available to Shareholders upon their requests by the Company Secretary.
Guideline 16.5 of the Code: Minutes of general meetings
The Company acknowledges that voting by poll in all its general meetings is integral in the enhancement of corporate governance. The Company adhere to the requirements of the Listing Manual of the SGX-ST and the Code, all resolutions at the Company’s general meetings held on or after 1 August 2015, if any, are put to vote by poll. The detailed results of each resolution are announced via SGXNet after the general meetings. The Company had adopted electronic polling for the resolutions voted at the AGM held during the financial year ended 31 December 2018.
Guideline 16.6 of the Code: All resolutions to vote by poll
Dealing in Securities
The Company has adopted and implemented an Insider Trading (Prevention) Policy (the “Policy”). The Policy is to ensure that the Company, the Company’s Directors, officers, employees of the Group as well as consultants or contractors to the Group (collectively the “Covered Persons”) and immediate family members of the Covered Persons are aware of their legal obligations in relation to the dealing of securities in the Company. Covered Persons who are in possession of unpublished material price sensitive information and use such information for their own material gain in relation to those securities are committing an offence. The Company, while having provided the window periods for dealing in the Company’s securities, has its own internal compliance code in providing guidance to its officers with regard to dealing in the Company’s securities including reminders that the law on insider trading is applicable at all the times.
Before the close of each window period, every officer in the Company is reminded not to deal in the Company’s securities on a short-term basis. Accordingly, the Company had complied with Rule 1207 (19) of the Listing Manual.
On 28 May 2009, a Disciplinary Committee (the “DC”) was formed to conduct inquiry on possible breaches of the Policy. The role of the DC is to report its finding to the Board and make recommendation as to the penalty if applicable. The Board will decide based on the DC’s recommendation.
The DC comprises three (3) members, a majority of whom are Independent Non-Executive Directors. The chairman of the DC is an Independent Non-Executive Director.
The members of the DC are:
Mr Ong Kian Min – ChairmanDr George Quek Meng Tong – MemberMr Chan Soo Sen – Member
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Interested Person Transactions
When a potential conflict arises, the Directors concerned do not participate in discussions and refrains from exercising any influence over other members of the Board.
The AC has reviewed the Interested Person Transactions (“IPTs”) entered into during the financial year by the Group and the aggregate value of IPTs entered during the financial year ended 31 December 2018 is as follows:
Name of Interested Person
Aggregate value (S$’000) of all IPTs during the financial
year under review
Aggregate value of all IPTs conducted during the financial year under review under the
shareholders’ mandate pursuant to Rule 920 of the Listing Manual (excluding transactions
less than S$100,000)
(1) Sky One Art Investment Pte Ltd – Purchases of artwork
314 Not applicable – the Group does not have a shareholders’ mandate pursuant to Rule 920
of the Listing Manual(2) Kungfu Kitchen and Capitol F&B – License fee & miscellaneous charges
for operating at Vivo City Food Court
470
Material Contracts
Except as disclosed in IPT above, there is no material contract or loan entered into by the Company or any of its subsidiaries involving interests of any Director or Controlling Shareholder during the financial year ended 31 December 2018.
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Information for the Directors who are retiring and being eligible, offer themselves for re-election at the forthcoming AGM pursuant to Rule 720(5) of the Listing Manual of the SGX-ST:
Details Name of DirectorChan Soo Sen Paul Charles Kenny
Date of Appointment 14 August 2006 1 March 2016
Date of last re-appointment (if applicable) 20 April 2016 20 April 2016
Age 62 70
Country of principal residence Singapore Thailand
The Board’s comments on this appointment (including rationale, selection criteria, and the search and nominationprocess)
The Board of the Company has accepted the NC’s recommendation, who has reviewed and considered Mr Chan is able to exercise judgement as the Independent Director on the corporate affairs of the Group and independent of the Management.
The Board considers Mr Chan to be independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.
The Board of the Company has accepted the NC’s recommendation, who has reviewed and considered Mr Kenny’s contribution as Non-Executive Director of the Company.
Whether appointment is executive, and if so, the area of responsibility
Non-Executive. Non-Executive.
Job Title (e.g. Lead ID, AC Chairman, AC Member etc.)
Independent Director, Chairman of Remuneration Committee and member of Audit Committee and Nominating Committee
Non-Executive Director
Professional qualifications • Master of Science in Management Science, University of Stanford
• Bachelor of Arts in Mathematics (Second Class Honors), Keble College University of Oxford
• General Management Program, Ashridge Management College, England
• Director Certificate Program, Thai Institute of Directors Association
Working experience and occupation(s) during the past 10 years
• Singbridge International Singapore Pte Ltd (2009-2012), Executive Vice President
• Keppel Corporation (2006-2009), Director (Chairman’s Office)
• Ministry of Trade & Industry (2005-2006), Minister of State
• Ministry of Education (2004-2006), Minister of State
• The Minor Food Group Plc. (2002-present), Chief Executive Officer
• The Minor Food Group Plc. (1993-2002), Senior Vice President/Chief Operating Officer
• Pizza Hut (Taiwan) Jardine Pacific Ltd. T.P.H. Company Ltd. (1990-1993), Managing Director
• Jardine Restaurant, Victoria, Australia (1987-1989), Operations Manager
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Details Name of DirectorChan Soo Sen Paul Charles Kenny
Working experience and occupation(s) during the past 10 years (cont’d)
• Prime Minister’s Office & Ministry of Community Development & Sports (2001-2004), Minister of State
• Prime Minister’s Office & Ministry of Health (2001), Senior Parliamentary Secretary
• Prime Minister’s Office & Ministry of Health (1999-2001), Parliamentary Secretary
• Prime Minister’s Office & Ministry of Community Development (1997-1999), Parliamentary Secretary
• Member of Parliament (1996-2011)
• China-Singapore Suzhou Industrial Park Development Co Ltd (1994-1996), Chief Executive Officer
Shareholding interest in the listed issuer and its subsidiaries
Nil Nil
Any relationship (including immediate family relationships) with any existing director, existing executive officer, theissuer and/or substantial shareholder of the listed issuer or of any of its principal subsidiaries
Nil Nil
Conflict of interest (including any competing business)
Nil Nil
Undertaking (in the format set out in Appendix 7.7) under Rule 720(1) has been submitted to the listed issuer
Yes Yes
Other Principal Commitments Including Directorships
Past (for the last 5 years)
Independent Director of:
• Cogent Holdings Limited• Frederich Frobel
Past (for the last 5 years)
Nil
Present
Director of:
• The Minor Food Group Plc • Minor International Plc• Burger (Thailand) Limited• Catering Associates Limited • Minor Cheese Limited• Minor Dairy Limited • Minor DQ Limited
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Details Name of DirectorChan Soo Sen Paul Charles Kenny
Other Principal Commitments Including Directorships (cont’d)
Present
Principal Commitments:
• Nanyang Centre of Public Administration, Nanyang Technological University, Adjunct Professor
• SCP Consultants, Chairman and Independent Director
Independent Director of:
• Midas Holdings Limited• Best World International
• SLRT Limited• Select Service Partner Limited• The Coffee Club (Thailand) Limited• Swensen’s (Thai) Limited • Samui Beach Residence Limited• Oaks Hotel & Resort Limited • The Minor (Beijing) Restaurant
Management Co. Ltd • Minor Food Group (Singapore) Pte.
Ltd • Sizzler (China) Limited• Patara Fine Thai Cuisine Limited• Beijing Qian Bai Ye Investment
Consultation Co., Ltd. • Beijing Riverside & Courtyard Investment
Management Co., Ltd• Over Success Enterprise Pte Ltd• Grab Food Ltd • Espresso Pty Ltd. • First Avenue Company Limited • Minor DKL Construction Pty Ltd • Minor DKL Food Group Pty Ltd • Minor DKL Management Pty Ltd • Minor DKL Stores Pty Ltd • Rib and Rumps Holdings Pty Ltd • Ribs and Rumps International Pty Ltd • Ribs and Rumps Operating Company
Pty Ltd • Ribs and Rumps Properties Pty Ltd • Ribs and Rumps System Pty Ltd • TCC Operations Pty Ltd • TGT Operations Pty Ltd• The Coffee Club Franchising Company
Pty Ltd • The Coffee Club Investment Pty Ltd • The Coffee Club Pty Ltd • Liwa Minor Food & Beverages LLC • The Coffee Club (Technology) Pty. Ltd.• Veneziano Coffee Roasters Holdings
Pty Ltd• VGC Food Group Pty Ltd• Minor Food (Seychelles) Limited• Suda Limited• MSP Property Limited• • Benihana Asia Pte. Ltd.• Benihana Holding Pte. Ltd.• Benihana (UK) Limited• Minor Learning Co., Ltd.
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Details Name of DirectorChan Soo Sen Paul Charles Kenny
The general statutory disclosures of the Directors are as follows:
a. Whether at any time during the last 10 years, an application or a petitionunder any bankruptcy law of any jurisdiction was filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within 2 years from the date he ceased to be a partner?
No No
b. Whether at any time during the last 10 years, an application or a petition under any law of any jurisdiction was filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within 2 years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding up or dissolution of that entity or, where that entity is the trustee of a business trust, that business trust, on the ground of insolvency?
No No
c. Whether there is any unsatisfied judgment against him?
No No
d. Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose?
No No
e. Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach?
No No
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Details Name of DirectorChan Soo Sen Paul Charles Kenny
f. Whether at any time during the last 10 years, judgment has been entered against him in any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or he has been the subject of any civil proceedings (including any pending civil proceedings of which he is aware) involving an allegation of fraud, misrepresentation or dishonesty on his part?
No No
g. Whether he has ever been convicted in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust?
No No
h. Whether he has ever been disqualified from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust?
No No
i. Whether he has ever been the subject of any order, judgment or ruling of any court, tribunal or governmental body, permanently or temporarily enjoining him from engaging in any type of business practice or activity?
No No
j. Whether he has ever, to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of the affairs of :—
i. any corporation which has been investigated for a breach of any law or regulatory requirement governing corporations in Singapore or elsewhere; or
No No
ii. any entity (not being a corporation) which has been investigated for a breach of any law or regulatory requirement governing such entities in Singapore or elsewhere; or
No No
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Details Name of DirectorChan Soo Sen Paul Charles Kenny
iii. any business trust which has been investigated for a breach of any law or regulatory requirement governing business trusts in Singapore or elsewhere; or
No No
iv. any entity or business trust which has been investigated for a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, in connection with any matter occurring or arising during that period when he was so concerned with the entity or business trust?
No No
k. Whether he has been the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Monetary Authority of Singapore or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere?
No No
Information required
Disclosure applicable to the appointment of Director only.
Any prior experience as a director of an issuer listed on the Exchange?
Yes No
If yes, please provide details of prior experience. • Cogent Holdings Limited• Midas Holdings Limited• Best World International
N/A
If no, please state if the director has attended or will be attending training on the roles and responsibilities of a director of a listed issuer as prescribed by the Exchange.
N/A Mr Paul Charles Kenny is a Director of Minor International Plc., a company listed on Thailand Stock Exchange.
Mr Paul Charles Kenny had also attended the training on the roles and responsibilities of a Director of listed company as prescribed by the Exchange.
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INDEX PAGES
��DIRECTORS’ STATEMENT
��INDEPENDENT AUDITOR’S REPORT
��CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
��BALANCE SHEETS
��STATEMENTS OF CHANGES IN EQUITY
��CONSOLIDATED CASH FLOW STATEMENT
��NOTES TO THE FINANCIAL STATEMENTS
���STATISTICS OF SHAREHOLDINGS
��� NOTICE OF ANNUAL GENERAL MEETING
PROXY FORM
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The directors are pleased to present their report to the members together with the audited consolidated financial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2018.
OPINION OF THE DIRECTORS
In the opinion of the directors,
(a) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are drawn up so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018 and the financial performance, changes in equity and cash flows of the Group and changes in equity of the Company for the year ended on that date; and
(b) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
DIRECTORS
The directors of the Company in office at the date of this report are:
Dr George Quek Meng Tong (Chairman)Katherine Lee Lih Leng (Deputy Chairman)Ong Kian MinChan Soo SenDr Tan Khee Giap Paul Charles Kenny
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES
Except as disclosed in this report, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose object is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES
The following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings, required to be kept under section 164 of the Singapore Companies Act, Chapter 50, an interest in shares of the Company as stated below:
Direct interest Deemed interest
Name of director
As at 1January
2018(Restated)
As at 31December
2018
As at 21January
2019
As at 1January
2018 (Restated)
As at 31December
2018
As at 21January
2019
The Company(Ordinary shares)
Dr George Quek Meng Tong 191,375,320 191,375,320 191,375,320 – – –Katherine Lee Lih Leng 104,830,040 104,830,040 104,830,040 – – –Ong Kian Min 240,000 240,000 240,000 – – –
The number of shares have taken into account the effect of the share split during the year.
DIRECTORS’ STATEMENT
ANNUAL REPORT 2018 69.
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DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D)
By virtue of Section 7 of the Companies Act, Chapter 50, Dr George Quek Meng Tong and Katherine Lee Lih Leng are deemed to be interested in the shares held by the Company in its subsidiaries.
Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year.
SHARE PLAN
The Company has a Restricted Share Grant Plan which are administered by the Remuneration Committee comprising three Directors namely Messrs Chan Soo Sen (Chairman), Ong Kian Min (Member) and Dr Tan Khee Giap (Member). Details of the Restricted Share Grant Plan is as follows:
The BreadTalk Restricted Share Grant Plan
The BreadTalk RSG Plan 2018 (“RSG Plan”) was approved at the Extraordinary General Meeting on 20 April 2018. The RSG Plan has replaced the 2008 RSG Plan which expired on 28 April 2018. The key terms of the RSG Plan is consistent with the 2008 RSG Plan.
The RSG Plan is centred on the accomplishment of specific pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid Shares (“Award”). The reward structure allows the Company to target specific performance objectives and incentivise the Participants to put in their best efforts to achieve these targets.
Eligibility
The following persons shall be eligible to participate in the RSG Plan subject to the absolute discretion of the Remuneration Committee:
(i) Employees
Employees who are confirmed in their employment with the Company or any subsidiary, or employees of associated companies who hold such rank as may be designated by the Committee from time to time and who, in the opinion of the Committee, have contributed or will contribute to the success of the Group; and
(ii) Directors
Executive and non-executive directors of the Company and its subsidiaries, provided always that any of the aforesaid persons:
– have attained the age of twenty-one (21) years on or before the Award Date; and – not undischarged bankrupts.
Controlling Shareholders and their Associates within the above categories are eligible to participate in the RSG Plan. Participation in the RSG Plan by Controlling Shareholders or their Associates must be approved by the independent shareholders. A separate resolution shall be passed for each such Participant and to approve the number of Shares to be awarded to the Participant and the terms of such Award.
There shall be no restriction on the eligibility of any Participant to participate in any other share option or share incentive schemes implemented or to be implemented by the Company or another company within the Group.
DIRECTORS’ STATEMENT
BREADTALK GROUP70.
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SHARE PLAN (CONT’D)
The BreadTalk Restricted Share Grant Plan (cont’d)
Size of RSG Plan
The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the RSG Plan shall not exceed twenty five per cent (25%) of the Shares available under the RSG Plan. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the RSG Plan.
The aggregate number of Shares to be awarded pursuant to the RSG Plan when added to the number of Shares issued and issuable in respect of such other Shares issued and/or issuable under such other share-based incentive schemes of the Company, shall not exceed fifteen per cent (15%) of the total issued share capital excluding treasury shares of the Company on the day preceding the relevant Award Date.
Grant of RSG Plan
The grant of Awards under the RSG Plan may be made from time to time during the year when the RSG Plan is in force.
While Awards may be granted at any time in the year, it is anticipated that Awards under the RSG Plan would be made once a year, after the Company’s annual general meeting. It will be administered by the Remuneration Committee.
Share Awards and Vesting
The final number of restricted shares awarded will depend on the achievement of pre-determined targets over a one year period. On meeting the performance conditions for the performance period, one-third of the restricted shares will vest. The balance will vest equally over the subsequent two years with fulfilment of service requirements.
The details of the restricted shares awarded under the 2008 RSG Plan since its commencement up to 31 December 2018 are as follows:
Name of Participant
Conditional restricted
shares granted during the year
Aggregate conditional restricted shares
awarded since commence-
ment of the Plan
Aggregate conditional restricted shares
lapsed since commence-
ment of the Plan
Aggregate conditional restricted
shares vested and released
during the year
Aggregate conditional restricted shares
vested and released since
commence-ment
of the Plan
Aggregate conditional restricted shares
outstanding at end of
the year(a) (b) (c) (a)–(b)–(c)
Directors of the Company
Dr George Quek Meng Tong (1) – 358,400 – – 358,400 –
Katherine Lee Lih Leng (1) – 308,000 – – 308,000 –
Associate of a Controlling Shareholder
Frankie Quek Swee Heng (2) – 281,940 – 13,410 271,380 10,560
DIRECTORS’ STATEMENT
ANNUAL REPORT 2018 71.
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SHARE PLAN (CONT’D)
The BreadTalk Restricted Share Grant Plan (cont’d)
Share Awards and Vesting (cont’d)
Name of Participant
Conditional restricted
shares granted during the year
Aggregate conditional restricted shares
awarded since commence-
ment of the Plan
Aggregate conditional restricted shares
lapsed since commence-
ment of the Plan
Aggregate conditional restricted
shares vested and released
during the year
Aggregate conditional restricted shares
vested and released since
commence-ment
of the Plan
Aggregate conditional restricted shares
outstanding at end of
the year(a) (b) (c) (a)–(b)–(c)
Participants who received 5% or more of the total grants available
Oh Eng Lock* – 3,084,860 – – 3,084,860 –Tan Aik Peng – 56,000 – 19,040 19,040 36,960Cheng William – 835,244 – 80,702 774,524 60,720Chan Ying Jian – 74,000 – 25,160 25,160 48,840Chu Heng Hwee# – 824,000 130,020 227,160 447,140 246,840Jenson Ong Chin Hock – 175,200 – 14,280 147,480 27,720Other participants – 2,989,160 340,440 26,780 2,630,240 18,480
– 8,986,804 470,460 406,532 8,066,224 450,120
The number of shares have taken into account the effect of the shares split during the year.
* This includes a total of 1,563,332 and 977,528 shares that were released via the issuance of treasury shares in relation to a sign-on bonus and award of service equity granted to Mr Oh Eng Lock.
# This includes a total of 100,000 shares that were released via the issuance of treasury shares in relation to a sign-on bonus granted to Mr Chu Heng Hwee.
DIRECTORS’ STATEMENT
BREADTALK GROUP72.
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SHARE PLAN (CONT’D)
The BreadTalk Restricted Share Grant Plan (cont’d)
Share Awards and Vesting (cont’d)
The details of the restricted shares awarded under the BreadTalk RSG Plan 2018 since its commencement up to 31 December 2018 are as follows:
Name of Participant
Conditional restricted
shares granted during the year
Aggregate conditional restricted shares
awarded since commence-
ment of the Plan
Aggregate conditional restricted shares
lapsed since commence-
ment of the Plan
Aggregate conditional restricted
shares vested and released
during the year
Aggregate conditional restricted shares
vested and released since
commence-ment
of the Plan
Aggregate conditional restricted shares
outstanding at end of
the year(a) (b) (c) (a)–(b)–(c)
Associate of a Controlling Shareholder
Frankie Quek Swee Heng (1) 6,990 6,990 – – – 6,990
Participants who received 5% or more of the total grants available
Tan Aik Peng 7,089 7,089 – – – 7,089Cheng William 73,980 73,980 – – – 73,980Chan Ying Jian 43,650 43,650 – – – 43,650Chu Heng Hwee 206,890 206,890 – – – 206,890Jenson Ong Chin Hock 73,480 73,480 – – – 73,480Other participants 45,280 45,280 – – – 45,280
457,359 457,359 – – – 457,359
(1) Associate of Dr George Quek Meng Tong, a controlling shareholder of the Company
With the Remuneration Committee’s approval on the achievement of the performance targets for the performance period from FY2015 and FY2017, a total of 406,532 restricted shares were released via the issuance of treasury shares (FY2017: 242,212) under the RSG 2008 Plan. The number of shares have taken into account the effect of the shares split during the year.
DIRECTORS’ STATEMENT
ANNUAL REPORT 2018 73.
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AUDIT COMMITTEE
The audit committee (AC) carried out its functions in accordance with section 201B (5) of the Singapore Companies Act, Chapter 50, including the following:
• Reviewed the audit plans of the internal and external auditors of the Group and the Company, and reviewed the internal auditor’s evaluation of the adequacy of the Company’s system of internal accounting controls and the assistance given by the Group and the Company’s management to the external and internal auditors
• Reviewed the quarterly and annual financial statements and the auditor’s report on the annual financial statements of the Group and the Company before their submission to the board of directors
• Reviewed effectiveness of the Group and the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditor
• Met with the external auditor, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC
• Reviewed legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators
• Reviewed the cost effectiveness and the independence and objectivity of the external auditor• Reviewed the nature and extent of non-audit services provided by the external auditor• Recommended to the board of directors the external auditor to be nominated, approved the compensation of the
external auditor, and reviewed the scope and results of the audit• Reported actions and minutes of the AC to the board of directors with such recommendations as the AC considered
appropriate• Reviewed interested person transactions in accordance with the requirements of the Singapore Exchange Securities
Trading Limited’s Listing Manual
The AC, having reviewed all non-audit services provided by the external auditor to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditor. The AC has also conducted a review of interested person transactions.
The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.
Further details regarding the AC are disclosed in the Report on Corporate Governance.
DIRECTORS’ STATEMENT
BREADTALK GROUP74.
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AUDITOR
Ernst & Young LLP have expressed their willingness to accept re-appointment as auditor.
On behalf of the board of directors:
Dr George Quek Meng TongDirector
Katherine Lee Lih LengDirector
Singapore15 March 2019
DIRECTORS’ STATEMENT
ANNUAL REPORT 2018 75.
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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the balance sheets of the Group and the Company as at 31 December 2018, the statements of changes in equity of the Group and the Company and the consolidated income statement, consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements of the Group, the balance sheet and the statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards (International) (SFRS(I)) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2018 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group and changes in equity of the Company for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with Singapore Standards on Auditing (SSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (ACRA) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (ACRA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled our responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
(1) Impairment assessment of goodwill
As at 31 December 2018, goodwill is carried at $4,837,000 which represents 1.4% of the total non-current assets and 3% of total equity. We considered management’s annual goodwill impairment assessment to be a key audit matter because the process is complex and involves significant management judgement about future results of the Group’s various businesses. As discussed in Note 12, the key assumptions used in the cash flow projections are budgeted gross margins, growth rates, pre-tax discount rates and cost of disposal. These assumptions could be affected by expected future market and economic conditions such as economic growth, expected inflation rates, demographic developments, revenue and margin development.
As disclosed in Note 12, the Group allocated goodwill to two cash-generating units (“CGU”) – $3,569,000 to food court operations in Shanghai and $1,268,000 to food court operations in Singapore. Based on annual impairment testing, management assessed that no impairment was necessary for the current financial year.
INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2018To the members of BreadTalk Group Limited
BREADTALK GROUP76.
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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D)
Key Audit Matters (cont’d)
(1) Impairment assessment of goodwill (cont’d)
Our audit procedures included, among others, assessing management’s identification of the cash-generating-units and their carrying amounts. We tested the reasonableness of the assumptions used in the cash flow projections approved by the board of directors. We compared assumptions used by management in their cash flow projections to historic performance of the Group, and considered the viability of future plans, local economic development and industry outlook. Given the complexity of the assessment, we engaged our internal valuation specialists to assist us in evaluating the reasonableness of certain key assumptions such as pre-tax discount rates and growth rates. We evaluated management’s analysis on the sensitivity of the goodwill amount to reasonable changes in the key assumptions.
We also assessed the adequacy of the note disclosures concerning those key assumptions to which the outcome of the impairment test is most sensitive. The note disclosures on goodwill, key assumptions and sensitivities are included in Note 12 to the financial statements.
(2) Valuation of investment securities
The Group’s investment securities include unquoted junior bonds and unquoted equity instruments. As disclosed in Note 13, the Group’s unquoted junior bonds and unquoted equity instruments amounted to $24,304,000 and $58,703,000 respectively.
With the adoption of SFRS (I) 9 Financial Instruments in the current financial year, management has assessed the contractual terms of these instruments and its business model and have determined that these investment securities are to be classified and measured at fair value through profit and loss.
The valuations of these investment securities are significant to our audit due to their magnitude, complexity of the valuation models, and the involvement of significant management judgement on the inputs to the valuation models.
Unquoted junior bonds
The fair value of unquoted junior bonds is determined using the discounted cash flow method. The key assumptions used in the cash flow projections are interest to be received over the term of the instrument and pre-tax discount rates. These assumptions are dependent on the profitability of the bond issuers which could be affected by expected future market and economic conditions such as occupancy rate, prevailing property tax rates and cost of maintenance of the underlying properties.
Our audit procedures included, among others, assessing management’s assumptions used in the cash flow projections which included a comparison of historical interest received against the forecast. We have also engaged our internal valuation specialists to assist us in evaluating the appropriateness of the valuation models and the reasonableness of key assumptions such as pre-tax discount rates. We have assessed the adequacy of the disclosures relating to these investments. The related disclosures are made in Note 2.15, Note 13 and Note 34 to the financial statements.
Unquoted equity instruments
The fair values of the unquoted equity instruments in Perennial Tongzhou Development Pte Ltd (“PTD”) and Perennial Tongzhou Holdings Pte Ltd (“PTH”) are determined using valuation models based on the discounted cash flow method. The key assumptions used in the valuation models include rental rates, expected sale proceeds, net lettable area, pre-tax discount rates, terminal growth rates and adjustments to reflect the Group’s minority stake in the investments. Most of these assumptions could be affected by expected future market and economic conditions such as economic growth, expected inflation rates, demographic developments, and the revenue and margin trend in the property leasing and development sector in the market that PTD and PTH operates in.
INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2018To the members of BreadTalk Group Limited
ANNUAL REPORT 2018 77.
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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D)
Key Audit Matters (cont’d)
(2) Valuation of investment securities (cont’d)
Unquoted equity instruments (cont’d)
The fair value of the unquoted equity instruments in Perennial 8 Shenton Investors Pte Ltd (“P8SIPL”) is determined using an asset based valuation model taking into consideration the fair value of the underlying property held by P8SIPL. The fair value of the underlying property is based on independent external valuation. The valuations are sensitive to key assumptions applied, including those relating to capitalization rate, rental value and vacancy rates.
The fair value of the unquoted equity instruments in Perennial HC Holdings Pte Ltd (“PHCH”) is determined using an asset based valuation model taking into consideration the fair value of the underlying asset held by PHCH. Given the recent transaction, management has used the recent transaction price paid to acquire the asset as the proxy to the fair value of the underlying asset held by PHCH.
Management obtained the external appraisers’ valuation reports from the investees of the respective investment securities held to support its determination of the fair value of the underlying properties.
As part of our audit procedures, we have considered the objectivity, independence and expertise of the external appraisers. Given the complexity of the valuation methods, we have also engaged our internal real estate and valuation specialists to assist us in evaluating the appropriateness of the valuation models and the reasonableness of certain key assumptions used by the management and the external appraisers in their valuation models. We have assessed the adequacy of the disclosures relating to these investments. The related disclosures are made in Note 2.15, Note 13 and Note 34 to the financial statements.
(3) Valuation of investment properties
As at 31 December 2018, the Group has investment properties amounting to $39,748,000 relating to office space in Shanghai, People’s Republic of China and shophouse in Singapore as disclosed in Note 11. The Group also has 29% interest in Chijmes, an investment property held through an associate, Perennial (Chijmes) Pte Ltd. The carrying value of this investment property recorded by the associate amounted to $334,000,000 as at 31 December 2018.
The valuation of these investment properties is significant to our audit due to their magnitude and the complexity of the valuation models. The valuation is highly dependent on a range of estimates used by external appraisers. These estimates include, amongst others, rental value, vacancy rates, interest rates and maintenance status.
Management uses external appraisers to support its determination of the fair value of the investment properties annually. In respect of the fair value of Chijmes, management obtained the external appraiser’s valuation report from its associate to support its determination of its fair value. As part of our audit procedures, we have considered the objectivity, independence and expertise of the external appraisers. Given the complexity, our internal real estate and valuation specialists assisted us in evaluating the appropriateness of the valuation models, data and assumptions used by the management and the external appraisers in their valuation of the investment properties. We also assessed the adequacy of the disclosures relating to these investments. The related disclosures are made in Note 2.12, Note 11 and Note 34 to the financial statements.
Other Information
Management is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2018To the members of BreadTalk Group Limited
BREADTALK GROUP78.
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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D)
Other Information (cont’d)
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Directors for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act and SFRS(I), and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The directors’ responsibilities include overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2018To the members of BreadTalk Group Limited
ANNUAL REPORT 2018 79.
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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D)
Auditor’s Responsibilities for the Audit of the Financial Statements (cont’d)
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiary corporations incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
The engagement partner on the audit resulting in this independent auditor’s report is Philip Ling Soon Hwa.
Ernst & Young LLPPublic Accountants and Chartered AccountantsSingapore15 March 2019
INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2018To the members of BreadTalk Group Limited
BREADTALK GROUP80.
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Notes 2018 2017(Restated)
$’000 $’000
Revenue 3 609,796 599,579Cost of sales (266,650) (266,465)
Gross profit 343,146 333,114Other operating income 4 31,185 33,178Interest income 5 3,158 2,234Distribution and selling expenses (243,264) (241,674)Administrative expenses (92,077) (80,850)Interest expense 5 (9,206) (5,420)
Profit before tax and share of results of associates and joint ventures 32,942 40,582Share of results of associates (1,165) (883)Share of results of joint ventures (634) 1,097
Profit before tax 6 31,143 40,796Income tax expense 8 (11,425) (11,047)
Profit for the year 19,718 29,749
Profit attributable to:Owners of the Company 15,191 21,680Non-controlling interests 4,527 8,069
19,718 29,749
Other comprehensive income:Items that may be reclassified subsequently to profit or lossNet (loss)/gain on available-for-sale financial assets (15) 15Foreign currency translation 196 (1,656)
Other comprehensive income for the year, net of tax 181 (1,641)
Total comprehensive income for the year 19,899 28,108
Total comprehensive income attributable to:Owners of the Company 15,372 20,039Non-controlling interests 4,527 8,069
19,899 28,108
Earnings per share (cents)Basic 9 2.70 3.85
Diluted 9 2.70 3.85
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2018
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
ANNUAL REPORT 2018 81.
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Group CompanyNotes 2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
(Restated) (Restated)$’000 $’000 $’000 $’000 $’000 $’000
Non-current assetsProperty, plant and equipment 10 173,413 169,097 180,663 77,597 73,228 71,252Investment properties 11 39,748 39,463 22,984 – – –Intangible assets 12 6,071 6,089 6,433 – – –Investment securities 13 83,149 72,068 72,878 – – 825Investment in subsidiaries 14 – – – 24,509 24,418 24,296Investment in associates 15 26,226 26,682 27,033 – – –Investment in joint ventures 16 8,684 10,040 8,234 – – –Other receivables 18 838 1,107 1,413 – – –Due from related corporations 19 – – – 30,773 30,692 26,768Deferred tax assets 8 2,340 2,559 2,749 – – –
340,469 327,105 322,387 132,879 128,338 123,141
Current assetsInvestment securities 13 4,797 12,886 17,222 – – –Inventories 17 11,304 9,721 9,806 – – –Trade and other receivables 18 57,947 51,952 52,049 5,534 2,417 4,269Tax recoverable 315 280 – – – –Prepayments 5,942 6,771 4,824 489 92 123Due from related corporations 19 1,124 1,128 1,094 169,231 105,149 61,885Amounts due from non-controlling shareholders
of subsidiaries (non-trade) 24 1,986 525 509 – – –Cash and cash equivalents 20 184,975 141,245 120,589 15,729 1,278 8,486
268,390 224,508 206,093 190,983 108,936 74,763
Current liabilitiesTrade and other payables 21 97,524 90,326 86,404 3,369 2,175 1,955Other liabilities 22 78,657 78,710 69,612 7,609 7,588 3,971Provision for reinstatement costs 23 15,768 15,846 14,417 27 27 27Due to related corporations 19 3,024 3,881 3,903 65,964 57,787 30,674Loan from a non-controlling shareholder of a
subsidiary (non-trade) 24 200 200 200 – – –Short-term loans 25 5,944 19,237 7,215 – 10,000 –Notes payables 27 75,000 – – 75,000 – –Current portion of long-term loans 26 16,631 37,864 24,238 3,348 4,122 4,122Tax payable 12,186 10,660 9,854 1,032 565 551
304,934 256,724 215,843 156,349 82,264 41,300
Net current (liabilities)/assets (36,544) (32,216) (9,750) 34,634 26,672 33,463
Non-current liabilitiesOther liabilities 22 7,641 9,392 11,385 – – –Notes payable 27 99,511 75,000 75,000 99,511 75,000 75,000Loan from a non-controlling shareholder of a
subsidiary (non-trade) 24 535 508 549 – – –Long-term loans 26 28,849 50,533 74,857 16,020 35,676 39,798Deferred tax liabilities 8 4,653 4,576 4,324 3,116 2,391 1,791
141,189 140,009 166,115 118,647 113,067 116,589
Net assets 162,736 154,880 146,522 48,866 41,943 40,015
Equity attributable to owners of the CompanyShare capital 28 33,303 33,303 33,303 33,303 33,303 33,303Treasury shares 28 (247) (460) (587) (247) (460) (587)Accumulated profits 96,128 93,342 88,543 15,017 8,332 6,779Other reserves 29 4,476 3,216 5,328 793 768 520
133,660 129,401 126,587 48,866 41,943 40,015Non-controlling interests 29,076 25,479 19,935 – – –
Total equity 162,736 154,880 146,522 48,866 41,943 40,015
BALANCE SHEETSAs at 31 December 2018
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
BREADTALK GROUP82.
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Attr
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2018
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(pre
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––
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196
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–19
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213
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ST
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ANNUAL REPORT 2018 83.
Financial BlackS19003 size:W210x H297 Mac9 Bee 1st Page 83Page 82
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Attr
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(719
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1 D
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017
33,3
03(4
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93,3
422,
954
1,63
915
591
(2,1
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177
129,
401
25,4
7915
4,88
0
ST
AT
EM
EN
TS
OF
C
HA
NG
ES
IN
EQ
UIT
YFo
r th
e ye
ar e
nded
31
Dec
embe
r 20
18
The
acco
mpa
nyin
g ac
coun
ting
polic
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and
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anat
ory
note
s fo
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tegr
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BREADTALK GROUP84.
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Share capitalTreasury shares
Accumulated profits
Share based compensation
reserveCapital reserve
Total equity
$’000 $’000 $’000 $’000 $’000 $’000(Note 28) (Note 28) (Note 29) (Note 29)
2018Company1 January 2018 33,303 (460) 8,332 591 177 41,943Profit for the year – – 17,949 – – 17,949
Total comprehensive income for the year – – 17,949 – – 17,949
Contributions by and distributions to owners
Share-based payments – – – 238 – 238Treasury shares transferred on
vesting of restricted share grant – 213 – (213) – –Dividends paid (Note 37) – – (11,264) – – (11,264)
Total transactions with owners in their capacity as owners – 213 (11,264) 25 – (11,026)
At 31 December 2018 33,303 (247) 15,017 616 177 48,866
2017Company1 January 2017 33,303 (587) 6,779 343 177 40,015Profit for the year – – 18,434 – – 18,434
Total comprehensive income for the year – – 18,434 – – 18,434
Contributions by and distributions to owners
Share-based payments – – – 375 – 375Treasury shares transferred on
vesting of restricted share grant – 127 – (127) – –Dividends paid (Note 37) – – (16,881) – – (16,881)
Total transactions with owners in their capacity as owners – 127 (16,881) 248 – (16,506)
At 31 December 2017 33,303 (460) 8,332 591 177 41,943
STATEMENTS OF CHANGES IN EQUITYFor the year ended 31 December 2018
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
ANNUAL REPORT 2018 85.
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Notes 2018 2017(Restated)
$’000 $’000
Cash flows from operating activitiesProfit before taxation 31,143 40,796Adjustments for:
Amortisation of intangible assets 12 414 437Depreciation of property, plant and equipment 10 40,768 40,045Loss / (gain) on divestment of investment securities 1,683 (8,714)Write back of provision for reinstatement cost 23 (99) (82)Write back loss on plant and equipment 10 (153) (438)(Write back) / impairment of trade receivables 18 (178) 210Impairment of other receivables 18 138 –Fair value gain on investment securities, net 4 (1,918) –Impairment of investment in associates 15 – 1,800Net fair value gains on investment property 11 (1,081) (118)Net gain on disposal of property, plant and equipment 4 (67) (2,331)Write off of trade and other receivables 841 15Interest expense 5 9,206 5,420Interest income 5 (3,158) (2,234)Property, plant and equipment written off 10 1,536 2,569Write off of intangible assets 12 77 –Share based payment expenses 238 375Share of results of associates 1,165 883Share of results of joint ventures 634 (1,097)Write-off of inventories 17 2 7Allowance for inventory obsolescence 17 12 5Dividend income from quoted investment equity – (57)Unrealised exchange loss, net 864 1,179
Operating cash flows before working capital changes 82,067 78,670(Increase)/decrease in:
Inventories (1,597) 73Trade and other receivables (5,357) (258)Prepayments 829 (1,947)Amount due from associates (trade) 9 (3)Amount due from joint ventures (trade) (8) 411
Increase/(decrease) in:Trade and other payables 1,367 4,008Other liabilities (1,665) 6,879Amount due to a joint venture (trade) (440) (159)
Cash flows generated from operations 75,205 87,674Tax paid (9,575) (10,124)
Net cash flows from operating activities 65,630 77,550
CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2018
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
BREADTALK GROUP86.
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Notes 2018 2017(Restated)
$’000 $’000
Cash flows from investing activitiesInterest income received 3,158 2,155Purchase of property, plant and equipment A (47,949) (30,166)Additions to intangible assets 12 (500) (109)Cash paid for reinstatement cost 23 (1,001) (927)Proceeds from disposal of property, plant and equipment 128 3,361Proceeds from divestment of investment securities 19,832 27,438Amount due from joint ventures(non-trade) (47) (441)Amount due to joint ventures (non-trade) (37) (103)Amount due to an associate (non-trade) (380) 240Amount due from an associate (non-trade) (210) –Amount due to non-controlling interests (non-trade) (1,466) –Investment in associates 15 (477) (2,273)Investment in a joint venture 16 – (1,005)Purchase of investment securities 13 (23,439) (12,886)Purchase of investment property 11 – (16,681)Dividends received from a joint venture 825 348Dividends received from an associate 60 –Dividends received from quoted equity – 57
Net cash flows used in investing activities (51,503) (30,992)
Cash flows from financing activitiesInterest paid (9,206) (5,420)Dividends paid to shareholders of the Company 37 (11,264) (16,881)Dividends paid to non-controlling shareholders of a subsidiary – (3,444)Capital contribution from non-controlling interests 7,103 –Proceeds from long-term loans 879 13,500Repayment of long-term loans (43,800) (24,126)Proceeds from short-term loans 42,863 37,657Repayment of short-term loans (56,159) (25,691)Proceeds from notes payable 100,000 –Loan due to a non-controlling shareholder 27 (41)Acquisition of non-controlling interest 14 (419) –
Net cash flows from/(used in) financing activities 30,024 (24,446)
Net increase in cash and cash equivalents 44,151 22,112Effect of exchange rate changes on cash and cash equivalents (421) (1,456)
Cash and cash equivalents at the beginning of the year 141,245 120,589
Cash and cash equivalents at the end of the year 20 184,975 141,245
Note A. Purchase of property, plant and equipment
During the year, the Group acquired property, plant and equipment with an aggregate cost of $47,687,000 (2017: $32,987,000). The additions were by way of cash payments of $42,914,000 (2017: $25,271,000), increase in provision for reinstatement costs of $1,095,000 (2017: $2,681,000), amount payable to other creditors of $3,456,000 (2017: $4,674,000) and accruals for amounts payable of $222,000 (2017: $361,000).
Cash outflow for the year also include payments in respect of property, plant and equipment acquired in the previous years of $5,035,000 (2017: $4,895,000).
CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2018
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
ANNUAL REPORT 2018 87.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
1. GENERAL
1.1 Corporate information
BreadTalk Group Limited (the “Company”) is a limited liability company incorporated and domiciled in the Republic of Singapore and is listed on the Singapore Exchange Securities Trading Limited (SGX-ST).
The registered office and principal place of business of the Company is located at BreadTalk IHQ, 30 Tai Seng Street, #09-01 Singapore 534013.
The principal activity of the Company is that of investment holding and provision of management services. The principal activities of the subsidiaries are disclosed in Note 14 to the financial statements.
Related corporations comprise companies within the BreadTalk Group Limited group of companies, and include associates and joint ventures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation and fundamental accounting assumption
As at 31 December 2018, the Group’s current liabilities exceeded their current assets by $36,544,000 (2017: $32,216,000). The ability of the Group to continue as a going concern is dependent on the Group’s ability to generate positive cash flows. In the opinion of the directors, the Group is able to continue as a going concern despite its net current liabilities position as the directors are of the view that the Group will be able to continue to generate net cash inflows from its operating activities for a period of 12 months from the date these financial statements were approved and to enable it to meet its financial obligations as and when they fall due. In addition, the Group has sufficient unutilised banking facilities available for future use should the need arise.
The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (International) (SFRS(I)).
For all periods up to and including the year ended 31 December 2017, the Group prepared its financial statements in accordance with Financial Reporting Standards in Singapore (FRS). These financial statements for the year ended 31 December 2018 are the first the Group has prepared in accordance with SFRS(I). Refer to Note 2.2 for information on how the Group adopted SFRS(I).
The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.
The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.
BREADTALK GROUP88.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of Singapore Financial Reporting Standards (International) (SFRS(I))
These financial statements for the year ended 31 December 2018 are the first the Group and the Company have prepared in accordance with SFRS(I). Accordingly, the Group and the Company have prepared financial statements that comply with SFRS(I) applicable as at 31 December 2018, together with the comparative period data for the year ended 31 December 2017, as described in the summary of significant accounting policies. On preparing the financial statements, the Group’s and the Company’s opening balance sheets were prepared as at 1 January 2017, the Group and the Company’s date of transition to SFRS(I).
The principal adjustments made by the Group on adoption of SFRS(I) and the adoption of the new standards that are effective on 1 January 2018 are disclosed below.
Exemptions applied on adoption of SFRS(I)
SFRS(I) allows first-time adopters exemptions from the retrospective application of certain requirements under SFRS(I). The Group has applied the following exemptions:
• SFRS(I) 3 Business Combinations has not been applied to either acquisitions of subsidiaries that are considered businesses under SFRS(I), or acquisitions of interests in associates and joint ventures that occurred before 1 January 2017. The carrying amounts of assets and liabilities at the date of transition to SFRS(I) is the same as previously reported under FRS.
• SFRS(I) 1-21 The Effects of Changes in Foreign Exchange Rates has not been applied retrospectively to fair value adjustments and goodwill from business combinations that occurred before the date of transition to SFRS(I). Such fair value adjustments and goodwill are treated as assets and liabilities of the parent rather than as assets and liabilities of the acquiree. Therefore, those assets and liabilities are already expressed in the functional currency of the parent or are non-monetary foreign currency items and no further translation differences occur.
• The comparative information do not comply with SFRS(I) 9 Financial Instruments or SFRS(I) 7 Financial Instruments: Disclosures to the extent the disclosures relate to items within the scope of SFRS(I) 9.
New accounting standards effective on 1 January 2018
The accounting policies adopted are consistent with those previously applied under FRS except that in the current financial year, the Group has adopted all the SFRS(I) which are effective for annual financial periods beginning on or after 1 January 2018. Except for the impact arising from the exemptions applied as described above and the adoption of SFRS(I) 9 and SFRS(I) 15 described below, the adoption of these standards did not have any material effect on the financial performance or position of the Group and the Company.
SFRS(I) 9 Financial Instruments
On 1 January 2018, the Group adopted SFRS(I) 9 Financial instruments, which is effective for annual periods beginning on or after 1 January 2018.
The changes arising from the adoption of SFRS(I) 9 have been applied retrospectively. The Group has elected to apply the exemption in SFRS(I) 1 and has not restated comparative information in the year of initial application. The impact arising from SFRS(I) 9 adoption was included in the opening retained earnings at the date of initial application, 1 January 2018. The comparative information was prepared in accordance with the requirements of FRS 39.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of SFRS(I) (cont’d)
SFRS(I) 9 Financial Instruments (cont’d)
Classification and Measurement
SFRS(I) 9 requires debt instruments to be measured either at amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVPL). Classification of debt instruments depends on the entity’s business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). An entity’s business model is how an entity manages its financial assets in order to generate cash flows and create value for the entity either from collecting contractual cash flows, selling financial assets or both. If a debt instrument is held to collect contractual cash flows, it is measured at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held both to collect the assets’ contractual cash flows and to sell the assets are measured at FVOCI. Financial assets are measured at FVPL if they do not meet the criteria of FVOCI or amortised cost.
The assessment of the business model and whether the financial assets meet the SPPI requirements was made as of 1 January 2018, and then applied retrospectively to those financial assets that were not derecognised before 1 January 2018.
The Group has assessed which business model applies to the financial assets held by the Group at 1 January 2018 and has classified its financial instruments into the appropriate categories in accordance with SFRS(I) 9.
The Group had measured its held-to-maturity investments in junior bonds and debt securities at amortised cost. Upon the adoption of SFRS(I) 9, the Group measures these instruments at FVPL. The impact arising from this change resulted in a decrease in carrying value of $2,540,000 to the instruments in junior bonds and debt securities with a corresponding adjustment to the retained earnings as at 1 January 2018. SFRS(I) 9 requires all equity instruments to be carried at fair value through profit or loss, unless an entity chooses on initial recognition, to present fair value changes in other comprehensive income.
The Group had measured its available-for-sale unquoted equity securities at cost. Upon the adoption of SFRS(I) 9, the Group measures the unquoted equity securities at FVPL. The impact arising from this change resulted in an increase in carrying value of $1,705,000 to the unquoted equity securities with a corresponding adjustment to the opening retained earnings as at 1 January 2018.
Impairment
SFRS(I) 9 requires the Group to record expected credit losses on all of its financial assets measured at amortised cost. The Group previously recorded impairment based on the incurred loss model when there is objective evidence that a financial asset is impaired.
Upon adoption of SFRS(I) 9, the Group recognised additional impairment on the Group’s trade receivables of $28,000, other receivables of $18,000 and amount due from related corporations of $260,000. The additional impairment recognised arising from adoption of SFRS(I) 9 above resulted in a corresponding decrease in retained earnings of $306,000 as at 1 January 2018.
Tax adjustments and other adjustments
There is no tax impact to the Group arising from the adoption of SFRS(I) 9 as fair value gains are capital in nature.
BREADTALK GROUP90.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of SFRS(I) (cont’d)
SFRS(I) 9 Financial Instruments (cont’d)
The Group has assessed which business model applies to the financial assets held by the Group at 1 January 2018 and has classified its financial instruments into the appropriate categories in accordance with SFRS(I) 9. The effects, before tax impact are as follows:
Group
Measurement Category
FRS 39 carrying
amount on 31.12.2017
Re-classifications
Re- measurements
SFRS(I) 9 carrying
amount on 1.1.2018
Retained earnings effect on 1.1.2018
$’000 $’000 $’000 $’000 $’000
Reclassified from available-for-sale quoted equity instruments, at FVOCI – 200 – 200 –
Reclassified from available-for-sale unquoted equity instruments, carried at cost – 45,372 1,705 47,077 1,705
Reclassified from held-to-maturity unquoted junior bonds, carried at cost – 26,496 (2,157) 24,339 (2,157)
Reclassified from held-to-maturity quoted debt securities, carried at cost – 12,886 (383) 12,503 (383)
FVPL balances, reclassifications and remeasurements at 1 January 2018 – 84,954 (835) 84,119 (835)
Reclassified to FVPL – (200) – – –
FVOCI balances, reclassifications and remeasurements at 1 January 2018 – (200) – – –
The initial application of SFRS(I) 9 does not have any reclassification effect to the Company’s financial statements.
Impairment
The reconciliation for loss allowances for the Group are as follow:
GroupTrade and
other receivablesDue from related
corporations$’000 $’000
Opening loss allowance as at 1 January 2018 297 –Amount restated through opening retained earnings 46 260
Adjusted loss allowance 343 260
ANNUAL REPORT 2018 91.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of SFRS(I) (cont’d)
SFRS(I) 15 Revenue from Contracts with Customers
The Group adopted SFRS(I) 15 which is effective for annual periods beginning on or after 1 January 2018.
The Group applied SFRS(I) 15 retrospectively and has elected to apply the exemption in SFRS(I) 1 to apply the following practical expedients in accordance with the transition provisions in SFRS(I) 15:
• For completed contracts, the Group has not restated contracts that begin and end within the same year or are completed contracts at 1 January 2017. Had the Group elected not to apply this practical expedient, the amount of revenue recorded for the prior year would have been lower;
• For the comparative year ended 31 December 2017, the Group has not disclosed the amount of the transaction price allocated to the remaining performance obligations and an explanation of when the corresponding revenue is expected to be recognised.
The Group’s revenue mainly comprises of revenue from bakery sales and restaurant sales, revenue from the sub-lease of food court and franchise income. The key impact of adopting SFRS(I) 15 is detailed as follows:
Timing of revenue recognition
The Group’s franchise contracts include upfront franchise fees which represents development fees, training fees and store license fees, as well as recurring franchise fees which represents royalties to be paid based on a percentage of the franchisees’ revenue. Under the franchise contracts, the Group grants franchise rights / use of the Group’s intellectual property (including providing ongoing support to the franchisee) for each store.
The Group previously recognised upfront franchise fees upon the grant of rights, completion of the phases of the franchise setup, and transfer of know-how to the franchise in accordance with the terms stated in the franchise agreement. Under SFRS(I) 15, the Group recognises revenue over time throughout the license period of each store as the franchisee simultaneously receives and consumes the benefit from the Group’s performance of providing access to its license.
As a result, the Group will recognise an adjustment to decrease trade receivables by $5,423,000 and with a corresponding adjustment to retained earnings on 1 January 2017.
The Group’s balance sheet as at 31 December 2017 was restated, resulting in the decrease in trade receivables of $5,591,000 and a corresponding adjustment to retained earnings of $5,591,000. The statement of profit or loss for the year ended 31 December 2017 was also restated resulting in a decrease in revenue of $168,000.
BREADTALK GROUP92.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of SFRS(I) (cont’d)
The following is the reconciliation of the impact arising from first-time adoption of SFRS(I) including application of the new accounting standards on 1 January 2017 to the balance sheet of the Group.
1.1.2017 (FRS)
SFRS(I) 15adjustments
1.1.2017(SFRS(I))
$’000 $’000 $’000
Non-current assets 322,387 – 322,387
Current assets
Trade and other receivables 57,472 (5,423) 52,049Other current assets 154,044 – 154,044
211,516 (5,423) 206,093
Total assets 533,903 (5,423) 528,480
Current liabilities 215,843 – 215,843
Non-current liabilities 166,115 – 166,115
Total liabilities 381,958 – 381,958
Equity
Share Capital 33,303 – 33,303Treasury shares (587) – (587)Accumulated profits 93,966 (5,423) 88,543Other reserves 5,328 – 5,328
132,010 (5,423) 126,587
Non-controlling interests 19,935 – 19,935
Total equity 151,945 (5,423) 146,522
Total equity and liabilities 533,903 (5,423) 528,480
ANNUAL REPORT 2018 93.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of SFRS(I) (cont’d)
The following is the reconciliation of the impact arising from first-time adoption of SFRS(I) including application of the new accounting standards on 31 December 2017 and 1 January 2018 to the balance sheet of the Group.
31.12.2017 (FRS)
SFRS(I) 15 adjustments
31.12.2017 (SFRS(I))
SFRS(I) 9 adjustments
1.1.2018 (SFRS(I))
$’000 $’000 $’000 $’000 $’000
Non-current assets
Investment securities 72,068 – 72,068 (452) 71,616Other non-current assets 255,037 – 255,037 – 255,037
327,105 – 327,105 (452) 326,653
Current assets
Investment securities 12,886 – 12,886 (383) 12,503Trade and other receivables 57,543 (5,591) 51,952 (46) 51,906Due from related corporations 1,128 – 1,128 (260) 868Other current assets 158,542 – 158,542 – 158,542
230,099 (5,591) 224,508 (689) 223,819
Total assets 557,204 (5,591) 551,613 (1,141) 550,472
Current liabilities 256,724 – 256,724 – 256,724
Non-current liabilities 140,009 – 140,009 – 140,009
Total liabilities 396,733 – 396,733 – 396,733
Equity
Share Capital 33,303 – 33,303 – 33,303Treasury shares (460) – (460) – (460)Accumulated profits 98,933 (5,591) 93,342 (1,141) 92,201Other reserves 3,216 – 3,216 – 3,216
134,992 (5,591) 129,401 (1,141) 128,260Non-controlling interests 25,479 – 25,479 – 25,479
Total equity 160,471 (5,591) 154,880 (1,141) 153,739
Total equity and liabilities 557,204 (5,591) 551,613 (1,141) 550,472
BREADTALK GROUP94.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 First-time adoption of SFRS(I) (cont’d)
The following is the reconciliation of the impact arising from first-time adoption of SFRS(I) including application of the new accounting standards to the statement of comprehensive income the of Group for the year ended 31 December 2017.
31.12.2017 (FRS)
SFRS(I) 15adjustments
31.12.2017 (SFRS(I))
$’000 $’000 $’000
Revenue 599,747 (168) 599,579Cost of sales (266,465) – (266,465)
Gross profit 333,282 (168) 333,114Other items of income 35,412 – 35,412Other items of expense (327,944) – (327,944)
Profit before tax and share of results of associates and joint ventures 40,750 (168) 40,582
Share of results of associates (883) – (883)Share of results of joint ventures 1,097 – 1,097
Profit before tax 40,964 (168) 40,796Income tax expense (11,047) – (11,047)
Profit for the year 29,917 (168) 29,749
Profit attributable to:Owners of the Company 21,848 (168) 21,680Non-controlling interests 8,069 – 8,069
29,917 (168) 29,749
Other comprehensive income:Items that may be reclassified subsequently
to profit or lossNet gain on available-for-sale financial assets 15 – 15Foreign currency translation (1,656) – (1,656)
Other comprehensive income for the year, net of tax (1,641) – (1,641)
Total comprehensive income for the year 28,276 (168) 28,108
Total comprehensive income attributable to:Owners of the Company 20,207 (168) 20,039Non-controlling interests 8,069 – 8,069
28,276 (168) 28,108
Earnings per share (cents)Basic 3.88 (0.03) 3.85
Diluted 3.88 (0.03) 3.85
ANNUAL REPORT 2018 95.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.3 Standards issued but not yet effective
The Group has not adopted the following standards applicable to the Group that have been issued but not yet effective:
Description
Effective for annual periods beginning
on or after
SFRS(I) 16 Leases 1 January 2019SFRS(I) INT 23 Uncertainty over Income Tax Treatments 1 January 2019Amendments to SFRS(I) 9 Prepayment Features with Negative Compensation 1 January 2019Amendments to SFRS(I) 1-28 Long-term Interests in Associates and Joint Ventures 1 January 2019Annual Improvements to SFRS(I)s 2015-2017 Cycle 1 January 2019Amendments to SFRS(I) 10 and SFRS(I) 1-28 Sale or Contribution of Assets between an
Investor and its Associate or Joint VentureDate to be
determined
Except for SFRS(I) 16, the directors expect that the adoption of the other standards above will have no material impact on the financial statements in the year of initial application. The nature of the impending changes in accounting policy on adoption of SFRS(I) 16 are described below.
SFRS(I) 16 Leases
SFRS(I) 16 requires lessees to recognise most leases on balance sheets. The standard includes two recognition exemption for lessees – leases of ‘low value’ assets and short-term leases. SFRS(I) 16 is effective for annual periods beginning on or after 1 January 2019. At commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
The Group plans to adopt the new standard on the required effective date by applying SFRS(I) 16 retrospectively with the cumulative effect of initial application as an adjustment to the opening balance of retained earnings as at 1 January 2019.
On the adoption of SFRS(I) 16, the Group expects to choose, on a lease-by-lease basis, to measure the right-of-use asset at either:
(i) its carrying amount as if SFRS(I) 16 had been applied since the commencement date, but discounted using the lessee’s incremental borrowing rate as of 1 January 2019; or
(ii) an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before 1 January 2019.
In addition, the Group plans to elect the following practical expedients:
• not to reassess whether a contract is, or contains a lease at the date of initial application and to apply SFRS(I) 16 to all contracts that were previously identified as leases
• to apply the exemption not to recognise right-of-use asset and lease liabilities to leases for which the lease term ends within 12 months as of 1 January 2019
• to apply a single discount rate to a portfolio of leases with reasonably similar characteristics
BREADTALK GROUP96.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.3 Standards issued but not yet effective (cont’d)
SFRS(I) 16 Leases (cont’d)
The Group has performed a preliminary impact assessment based on current available information, and the assessment may be subject to the changes arising from on-going analysis until the Group adopts SRFS(I) 16 in 2019.
On the adoption of SFRS(I) 16, the Group expects to recognise right-of-use assets of approximately $343,447,000 and lease liabilities of $369,357,000 for its leases previously classified as operating leases, with a corresponding decrease in the opening retained earnings of $25,910,000 as of 1 January 2019.
2.4 Significant accounting estimates and judgements
The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting period. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Fair value of investments securities classified as FVPL
The Group has investments in unquoted equity instruments amounting to $58,703,000 as at 31 December 2018. Upon adoption of SFRS(I) 9, the unquoted equity instruments are measured at FVPL. The fair values of the instruments are determined using valuation models based on the discounted cash flow method and an asset based valuation method. The key assumptions used in the valuation models include rental rates, expected sale proceeds, net lettable area, pre-tax discount rates, terminal growth rates, vacancy rate, capitalization rate and adjustments to reflect the Group’s minority stake in the investments. Most of these assumptions could be affected by expected future market and economic conditions such as economic growth, expected inflation rates, demographic developments, and the revenue and margin trend in the property leasing and development sector in the market.
The Group has investments in junior bonds amounting to $24,304,000. Upon adoption of SFRS(I) 9, the investment in junior bonds are measured at FVPL. The fair value of unquoted junior bonds is determined using the discounted cash flow method. The key assumptions used in the cash flow projections are interest to be received over the term of the instrument and pre-tax discount rates. These assumptions are dependent on the profitability of the bond issuers which could be affected by expected future market and economic conditions such as occupancy rate, prevailing property tax rates and cost of maintenance of the underlying properties.
ANNUAL REPORT 2018 97.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 Significant accounting estimates and judgements (cont’d)
Valuation of investment properties
The Group carries its investment properties at fair value, with changes in fair value being recognised in profit or loss.
For the properties located in Shanghai and Singapore, the Group engaged real estate valuation experts to assess fair value as at 31 December 2018. The fair value of investment properties are determined by the independent real estate valuation expert using a recognised valuation technique. The technique used is the direct comparable approach. The key assumptions used to determine the fair value of the investment properties and sensitivity analysis are provided in Note 34.
The carrying amounts of the investment properties carried at fair value as at 31 December 2018 are $39,748,000 (2017: $39,463,000).
Impairment assessment of goodwill
As disclosed in Note 12 to the financial statements, the recoverable amounts of the cash generating units which goodwill have been allocated to are determined based on fair value less cost of disposal calculations. The fair value less cost of disposal calculations are based on discounted cash flow models, less cost of disposal. The recoverable amounts are most sensitive to the discount rates used in the discounted cash flow models as well as the expected future cash inflows and the growth rates used for extrapolation purposes. The key assumptions applied in the determination of the fair value less cost of disposal including a sensitivity analysis, are disclosed and further explained in Note 12 to the financial statements. The carrying amount of the goodwill as at 31 December 2018 is $4,837,000 (2017: $4,837,000).
2.5 Foreign currency
The financial statements are presented in Singapore Dollars, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.
(a) Transactions and balances
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss.
(b) Consolidated financial statements
For consolidation purpose, the assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the end of reporting period and their profit or loss are translated at the exchange rates prevailing at the date of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
BREADTALK GROUP98.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.6 Basis of consolidation and business combinations
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
• de-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost;
• de-recognises the carrying amount of any non-controlling interest;• de-recognises the cumulative translation differences recorded in equity;• recognises the fair value of the consideration received;• recognises the fair value of any investment retained;• recognises any surplus or deficit in profit or loss;• re-classifies the Group’s share of components previously recognised in other comprehensive income to
profit or loss or retained earnings, as appropriate.
(b) Business combinations and goodwill
Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any), that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation, is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by another SFRS(I).
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.
ANNUAL REPORT 2018 99.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.6 Basis of consolidation and business combinations (cont’d)
(b) Business combinations and goodwill (cont’d)
Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
The cash-generating units to which goodwill have been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates.
2.7 Transactions with non-controlling interests
Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company.
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributable to owners of the Company.
2.8 Subsidiaries
A subsidiary is an investee that is controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
In the Company’s balance sheet, investments in subsidiaries are accounted for at cost less impairment losses.
2.9 Joint arrangements
A joint arrangement is a contractual arrangement whereby two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
A joint arrangement is classified either as joint operation or joint venture, based on the rights and obligations of the parties to the arrangement.
To the extent the joint arrangement provides the Group with rights to the assets and obligations for the liabilities relating to the arrangement, the arrangement is a joint operation. To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the arrangement is a joint venture.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.9 Joint arrangements (cont’d)
(a) Joint operations
The Group recognises in relation to its interest in a joint operation,
(a) its assets, including its share of any assets held jointly;
(b) its liabilities, including its share of any liabilities incurred jointly;
(c) its revenue from the sale of its share of the output arising from the joint operation;
(d) its share of the revenue from the sale of the output by the joint operation; and
(e) its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the accounting policies applicable to the particular assets, liabilities, revenues and expenses.
(b) Joint ventures
The Group recognises its interest in a joint venture as an investment and accounts for the investment using the equity method. The accounting policy for investment in joint venture is set out in Note 2.10.
2.10 Joint ventures and associates
An associate is an entity over which the Group has the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control of those policies.
The Group accounts for its investments in associates and joint ventures using the equity method from the date on which it becomes an associate or joint venture.
On acquisition of the investment, any excess of the cost of the investment over the Group’s share of the net fair value of the investee’s identifiable assets and liabilities represents goodwill and is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the investee’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity’s share of the associate or joint venture’s profit or loss in the period in which the investment is acquired.
Under the equity method, the investment in associates or joint ventures are carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates or joint ventures. The profit or loss reflects the share of results of the operations of the associates or joint ventures. Distributions received from joint ventures or associates reduce the carrying amount of the investment. Where there has been a change recognised in other comprehensive income by the associates or joint venture, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and associate or joint venture are eliminated to the extent of the interest in the associates or joint ventures.
When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in associate or joint ventures. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate or joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognises the amount in profit or loss.
ANNUAL REPORT 2018 101.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.10 Joint ventures and associates (cont’d)
The financial statements of the associates and joint ventures are prepared as the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
2.11 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment other than freehold land and buildings are measured at cost less accumulated depreciation and any accumulated impairment losses. The cost includes the cost of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in Note 2.21. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows:
Leasehold property – 20 – 52 yearsLeasehold land – 49 yearsMachinery and equipment – 5 – 20 yearsElectrical works – 5 – 6 yearsFurniture and fittings – 5 – 6 yearsOffice equipment – 3 – 6 yearsRenovation – 2 – 6 yearsMotor vehicles – 5 – 6 years
Assets under construction included in plant and equipment are not depreciated as these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the year the asset is derecognised.
BREADTALK GROUP102.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.12 Investment properties
Investment properties are properties that are either owned by the Group or leased under a finance lease that are held to earn rentals or for capital appreciation, or both, rather than for use in the production or supply of goods or services, or for administrative purposes, or in the ordinary course of business. Investment properties comprise completed investment properties and properties that are being constructed or developed for future use as investment properties. Properties held under operating leases are classified as investment properties when the definition of an investment property is met.
Investment properties are initially measured at cost, including transaction costs.
Subsequent to initial recognition, investment properties are measured at fair value. Gain or losses arising from changes in fair value of investment properties are included in profit or loss in the year in which they arise.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.
2.13 Intangible assets
Intangible assets acquired separately are measured initially at cost. Following initial acquisition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.
(a) Trade mark
Costs relating to trade mark are capitalised and amortised on a straight-line basis over its estimated finite useful life of 5 to 10 years.
(b) Franchise rights
Costs relating to master franchise fees paid are capitalised and amortised on a straight-line basis over the lease/franchise period ranging from 4 to 20 years.
Costs relating to territory reservation fees are capitalised and amortised on a straight-line basis over the useful life of 6 years.
ANNUAL REPORT 2018 103.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.13 Intangible assets (cont’d)
(c) Location premium
Consideration paid to previous tenants to vacate premises in order to secure the lease arrangement are amortised on a straight-line basis over the new lease agreement period of 4 years.
(d) Brand value
Brand value was acquired through a business combination. The useful life of the brand is assessed to be finite and estimated to be 15 years because this is the length of time that the management expects the economic benefits of the brand to flow to the Group.
Brand value is amortised on a straight-line basis over its estimated economic useful life.
2.14 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses of continuing operations are recognised in profit or loss.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss.
2.15 Financial instruments
(a) Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Trade receivables are measured at the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third party, if the trade receivables do not contain a significant financing component at initial recognition.
BREADTALK GROUP104.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.15 Financial instruments (cont’d)
(a) Financial assets (cont’d)
Subsequent measurement
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the contractual cash flow characteristics of the asset. The three measurement categories for classification of debt instruments are:
(i) Amortised cost
Financial assets that are held for the collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Financial assets are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the assets are derecognised or impaired, and through amortisation process.
(ii) Fair value through other comprehensive income (FVOCI)
Financial assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Financial assets measured at FVOCI are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses and interest calculated using the effective interest method are recognised in profit or loss.
The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is de-recognised.
(iii) Fair value through profit or loss
Assets that do not meet the criteria for amortised cost or fair value through other comprehensive income (FVOCI) are measured at fair value through profit or loss. A gain or loss on a debt instruments that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss in the period in which it arises.
Derecognition
A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income for debt instruments is recognised in profit or loss.
(b) Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.15 Financial instruments (cont’d)
(b) Financial liabilities (cont’d)
Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.
De-recognition
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. On derecognition, the difference between the carrying amounts and the consideration paid is recognised in profit or loss.
2.16 Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is recognised for credit losses expected over the remaining life of the exposure, irrespective of timing of the default (a lifetime ECL).
For trade and other receivables, and amount due from related corporations, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
The Group considers a financial asset in default when contractual payments are between 90 day to 365 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
2.17 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and at bank and unpledged short-term fixed deposits.
2.18 Inventories
Inventories comprise raw materials, consumables, semi-finished goods, finished goods and base inventories.
Inventories are stated at the lower of cost and net realisable value. Costs comprise purchase costs accounted for on a weighted average cost basis. In the case of semi-finished goods, costs also include an appropriate share of production overheads based on normal operating capacity.
Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower cost and net realisable value.
BREADTALK GROUP106.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.18 Inventories (cont’d)
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
2.19 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2.20 Financial guarantee
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss.
2.21 Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset.
Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
2.22 Leases
(a) As lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
ANNUAL REPORT 2018 107.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.22 Leases (cont’d)
(b) As lessor
Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.24(g). Contingent rents are recognised as revenue in the period in which they are earned.
2.23 Employee benefits
(a) Defined contribution plans
The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Contributions to national pension schemes are recognised as an expense in the period in which the related services are performed.
Singapore
The Group makes contributions to the Central Provident Fund (“CPF”) scheme in Singapore, a defined contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates.
People’s Republic of China (“PRC”)
Subsidiaries incorporated and operating in the PRC are required to provide certain staff pension benefits to their employees under existing PRC regulations. Contributions are provided at rates stipulated by PRC regulations and are contributed to a pension fund managed by government agencies, which are responsible for administering these amounts for the subsidiaries’ PRC employees.
Hong Kong
Subsidiaries incorporated and operating in Hong Kong pay contributions to publicly or privately administered pension insurance plans on a mandatory basis. The subsidiaries have no further payment obligations once the contributions have been paid. The contributions are not reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(b) Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they are accrued to the employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
(c) The BreadTalk Restricted Share Grant Plan (“RSG Plan”)
Employees receive remuneration under the RSG Plan in the form of fully-paid shares (“Awards”) of the Company as consideration for services rendered. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the Awards at the date on which the Awards are granted. The fair value is estimated based on the market price of the shares on grant date less the present value of expected future dividends during the vesting period. The cumulative expense recognized at each reporting date until the vesting date reflects the Company’s best estimate of the number of Awards that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
In the Company’s separate financial statements, the fair value of the Awards granted to employees of its subsidiaries is recognised as an increase in the cost of the Company’s investment in subsidiaries, with a corresponding increase in equity.
BREADTALK GROUP108.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.24 Revenue
Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
Revenue is recognised when the Group satisfies a performance obligation by transferring a promised good or service to the customer, which is when the customer obtains control of the good or service. A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognised is the amount allocated to the satisfied performance obligation.
The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised:
(a) Bakery sales, restaurant sales and sales to franchisee
Revenue from the sale of goods is recognised upon the satisfaction of each performance obligations which is usually the delivery of goods to customers. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
(b) Franchise income
Upfront franchise fees is recognised over time throughout the license period of each store as the franchisee simultaneously receives and consumes the benefit from the Group’s performance of providing access to its license.
Recurring franchisee income is recognised on a period basis as a percentage of the franchise revenue in accordance with terms as stated in the franchise agreement.
(c) Food court revenue
Fixed rental income from the sub-lease of food courts is recognised as income in profit or loss on a straight-line basis over the lease term. The variable portion of the rental income which is computed based on a percentage of the food court tenants’ gross sales is recognised when such sales are earned.
Revenue from the sale of food and beverage is recognised upon delivery and acceptance by customers, net of sale discounts.
(d) Management fee
Management fee is recognised on an accrual basis.
(e) Interest income
Interest income is recognised as interest accrues (using the effective interest method) unless collectability is in doubt.
(f) Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
(g) Rental income
Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.
ANNUAL REPORT 2018 109.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.25 Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in profit or loss over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to profit or loss over the expected useful life of the relevant asset by equal annual instalments.
2.26 Taxes
(a) Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date, in the countries where the Group operates and generates taxable income.
Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
(b) Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:
• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
BREADTALK GROUP110.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.26 Taxes (cont’d)
(b) Deferred tax (cont’d)
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax is recognised in profit or loss. Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
(c) Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
2.27 Segment reporting
For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 36, including the factors used to identify the reportable segments and the measurement basis of segment information.
ANNUAL REPORT 2018 111.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.28 Share capital and share issue expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.
2.29 Treasury shares
The Group’s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration received, if reissued, is recognised directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them respectively.
2.30 Contingencies
A contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
(b) a present obligation that arises from past events but is not recognised because:
(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) The amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.
BREADTALK GROUP112.
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NO
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2017
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8,93
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7,85
94,
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4,62
235
2,64
334
0,14
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3,03
110
5,47
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,918
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,279
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,629
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796
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579
ANNUAL REPORT 2018 113.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
3. REVENUE (CONT’D)
(b) Judgement and methods used in estimating revenue
Recognition of franchise income over time
The Group’s franchise contracts include upfront franchise fees which represents development fees, training fees and store license fees, as well as recurring franchise fees which represents royalties to be paid based on a percentage of the franchisees’ revenue. Under the franchise contracts, the Group grants franchise rights / use of the Group’s intellectual property (including providing ongoing support to the franchisee) for each store.
The Group previously recognised upfront franchise fees upon the grant of rights, completion of the phases of the franchise setup, and transfer of know-how to the franchise in accordance with the terms stated in the franchise agreement. Under SFRS(I) 15, the Group recognises revenue over time throughout the license period of each store as the franchisee simultaneously receives and consumes the benefit from the Group’s performance of providing access to its license.
4. OTHER OPERATING INCOME
Group2018 2017
$’000 $’000
Management fee income 19,609 13,524Income from mall operation 547 482Government grant 1,156 1,713Special Employment Credit (1) 269 453Wage credit scheme (2) 921 739Income recognised from unredeemed stored value cards(3) 1,146 711Sponsorship income 490 540Rental income 2,992 2,705Gain on divestment of investment securities – 8,714Gain from fair value adjustment of investment properties
(Note 11) 1,081 118Gain from fair value adjustment of investment securities, net 1,918 –Write back of provision for reinstatement cost (Note 23) 99 82Dividend received from quoted equity instruments – 57Gain on disposal of plant and equipment 67 2,331Miscellaneous income 890 1,009
31,185 33,178
BREADTALK GROUP114.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
4. OTHER OPERATING INCOME (CONT’D)
(1) The Special Employment Credit (“SEC”) was introduced as a budget initiative in the financial year 2011 and was further enhanced in financial year 2012 to cover a wider range of employees and enabling more employers to benefit from the Scheme. The enhanced Scheme is for 5 years but it was extended for three years from 1 January 2017 to 31 December 2019. During Budget 2019, the Minister of Finance for Singapore announced a further 1 year extension from 31 December 2019 to 31 December 2020.
Under the extended SEC, for each Singaporean employee who is aged 55 and above and who earns up to $4,000 per month, the Company will receive up to 8% Special Employment Credit based on that employee’s salary and employee’s age. The Scheme has 2 payouts in March and September.
(2) The Wage Credit Scheme (“WCS”) was introduced as a budget initiative in 2013 to help businesses which may face rising wage costs in a tight labour market. The Government will co-fund 40% of wage increases to Singaporean employees earning a gross monthly wage of $4,000 for the financial year 2013 to 2015 and 20% co-funding in the financial years of 2016 and 2017. During Budget 2018, the WCS was further extended to 2020. The co-funding ratio will be 20% for 2018, and subsequently step down to 15% in 2019 and 10% in 2020.
(3) Income recognised from unredeemed stored value cards pertains to stored value cards issued in prior years with long periods of inactivity.
5. INTEREST INCOME AND INTEREST EXPENSE
Group2018 2017
$’000 $’000
Interest income from:– cash at bank and deposits 1,202 437– financial assets at fair value through profit and loss
(2017: held-to-maturity financial assets) 1,956 1,797
3,158 2,234
Interest expense on:– term loans (1,756) (1,970)– notes payable (7,450) (3,450)
(9,206) (5,420)
ANNUAL REPORT 2018 115.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
6. PROFIT BEFORE TAX
This is determined after charging the following:
Group2018 2017
$’000 $’000
Audit fees– auditor of the Company 327 311– affiliates of auditor of the Company 234 214– other auditors 189 159
750 684Non-audit fees to auditor of the Company
Recurring– tax returns compliance services 38 38– sales certifications 21 18– sustainability reporting 58 58– transfer pricing advisory services 26 –
143 114Non-recurring– tax advisory services and due diligence 73 31– Advisory services on SFRS(I) adoption 66 –– transfer pricing business case for change – 20– Agreed-upon-procedures for Medium Term Note Programme – 8– tax returns compliance services 28 –
167 59Non-audit fees to other auditors 114 79Amortisation of intangible assets (Note 12) 414 437Impairment/(write back) of loans and receivables– trade receivables (Note 18) (178) 210– other receivables (Note 18) 138 –Write off of trade and other receivables 841 15Directors’ fees 195 180Employee benefits (Note 7) 191,778 188,841Operating lease expenses– fixed portion 126,252 125,443– variable portion 11,697 11,174Depreciation of property, plant and equipment (Note 10) 40,768 40,045Property, plant and equipment written off (Note 10) 1,536 2,569(Write back)/impairment loss on property, plant and equipment (Note 10) (153) (438)Write-off of inventories (Note 17) 2 7Allowance for inventory obsolescence (Note 17) 12 5Loss from divestment of investment securities 1,683 –Impairment loss on investment in associates (Note 15) – 1,800
BREADTALK GROUP116.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
7. EMPLOYEE BENEFITS
Group2018 2017
$’000 $’000
Salaries and bonuses 142,633 137,408Central Provident Fund and other pension contributions 17,668 19,479Sales incentives and commission 7,418 4,733Other personnel benefits 24,059 27,221
191,778 188,841
RSG Plan
Under the RSG Plan, directors and employees receive remuneration in the form of fully-paid shares of the Company as consideration for services rendered. Restricted shares are granted conditionally and the final number of restricted shares awarded will depend on the achievement of pre-determined targets over a one year period. On meeting the performance conditions for the performance period, one-third of the restricted shares will vest. The balance will vest equally over the subsequent two years with the fulfilment of service requirements.
The fair value of the restricted shares granted is estimated based on the market price of the shares on grant date less the present value of expected future dividends during the vesting period.
During the year, 457,359 restricted shares were granted (2017: 360,000). There are 450,120 restricted shares outstanding at year end (2017: 378,626 shares).
8. INCOME TAX EXPENSE
Major components of income tax expense were:
Group2018 2017
$’000 $’000
Current tax– Current year 10,934 9,208– Under/(over) provision in prior years (720) 316
Deferred tax– Origination and reversal of temporary differences 448 513– (Over)/under provision in prior years (152) (71)
Withholding tax 915 1,081
Taxation expense 11,425 11,047
ANNUAL REPORT 2018 117.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
8. INCOME TAX EXPENSE (CONT’D)
A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December is as follows:
Group2018 2017
$’000 $’000
Profit before tax 31,143 40,796
Tax at the domestic rates applicable to profits in the countries where the Group operates(1) 4,802 6,587
Tax effect of:Expenses not deductible for tax purposes 5,770 3,212Depreciation not deductible for tax purposes 3,002 1,612Income not subject to taxation (954) (514)Share of results of associates and joint ventures (185) 356Tax savings arising from development and expansion incentive (2) – (349)Under/(over) provision in prior years– Current tax (720) 316– Deferred tax (152) (71)Withholding tax expense 915 1,081Effect of partial tax exemption and tax relief (108) (152)Deferred tax assets not recognised 1,315 595Benefits from previously unrecognised tax losses (1,996) (1,183)Tax savings from enhanced deductions (225) (537)Others (39) 94
Taxation expense 11,425 11,047
(1) This is prepared by aggregating separate reconciliations for each national jurisdiction.
(2) In February 2004, the Economic Development Board granted the Development and Expansion Incentive under the International Headquarters “(IHQ-DEI)” Award to a subsidiary. Subject to certain conditions, the subsidiary enjoys a concessionary tax rate of 10% on its qualifying income for a period of 5 years commencing 1 January 2003. The subsidiary was granted extensions of the DEI for 5 years each commencing 1 January 2008 and 1 January 2013.
BREADTALK GROUP118.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
8. INCOME TAX EXPENSE (CONT’D)
Deferred income tax as at 31 December relates to the following:
GroupBalance sheet Profit or loss
2018 31.12.2017 1.1.2017 2018 2017$’000 $’000 $’000 $’000 $’000
Deferred tax liabilities: Provisions (985) (1,116) (955) 131 (161)Differences in depreciation for
tax purposes (3,318) (3,166) (3,210) (152) 44Other items (350) (294) (159) (56) (135)
(4,653) (4,576) (4,324)
Deferred tax assets: Provisions 678 639 484 39 155Differences in depreciation for
tax purposes 544 546 741 (2) (195)Unutilised capital allowances 341 447 705 (106) (258)Other items 777 927 819 (150) 108
2,340 2,559 2,749
Deferred income tax (296) (442)
CompanyBalance sheet
2018 31.12.2017 1.1.2017$’000 $’000 $’000
Deferred tax liabilities: Differences in depreciation for tax purposes (3,116) (2,391) (1,791)
(3,116) (2,391) (1,791)
Deferred tax assets
No deferred tax assets were recognised in loss making entities during 2018 and 2017.
ANNUAL REPORT 2018 119.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
8. INCOME TAX EXPENSE (CONT’D)
Unrecognised tax losses, capital allowances and other temporary differences
As at 31 December 2018, the Group has tax losses of approximately $35,832,000 (31 December 2017: $36,320,000, 1 January 2017: $40,218,000), unutilised capital allowances of approximately $359,000 (31 December 2017: $1,688,000, 1 January 2017: $328,000) and other temporary differences of approximately $5,463,000 (31 December 2017: $5,281,000, 1 January 2017: $4,992,000) that are available for offset against future taxable profits, for which no deferred tax assets are recognised on these amounts due to uncertainty of their utilisation. The comparative unrecognised tax loss figures have been adjusted based on the latest tax submissions and finalisation of certain years of tax assessments.
The utilisation of the tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate. As at 31 December 2018, $35,666,000 (31 December 2017: $34,756,000, 1 January 2017: $38,735,000) of the unrecognised tax losses will expire between 1 and 5 years.
Unrecognised temporary differences relating to investments in subsidiaries
At the balance sheet date, no deferred tax liability (31 December 2017: nil, 1 January 2017: nil) has been recognised for taxes that would be payable on the undistributed earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed earnings of these subsidiaries will not be distributed in the foreseeable future.
Such temporary differences for which no deferred tax liability has been recognised aggregate to $33,130,000 (31 December 2017: $36,844,000, 1 January 2017: $33,966,000). The deferred tax liability is estimated to be $1,656,000 (31 December 2017: $1,842,000, 1 January 2017: $1,698,000).
Tax consequences of proposed dividends
There are no income tax consequences attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 37).
9. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the Group’s profit for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share are calculated by dividing the Group’s profit for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
These profit and share data are presented in the table below:
Group2018 2017
$’000 $’000
Profit for the year attributable to owners of the Company 15,191 21,680
BREADTALK GROUP120.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
9. EARNINGS PER SHARE (CONT’D)
Group2018 2017
No. of shares
No. ofshares
‘000 ’000
Weighted average number of ordinary shares for basic earnings per share computation * 563,209 562,790
Effects of dilution:– Restricted shares granted conditionally under the “BreadTalk
Restricted Share Grant Plan” 315 292
Weighted average number of ordinary shares for diluted earnings per share computation * 563,524 563,082
* The weighted average number of shares takes into account the weighted average effect of changes in treasury shares transactions during the year and the effect of share split during the year.
10. PROPERTY, PLANT AND EQUIPMENT
Leasehold property
Leasehold land
Machinery and
equipmentElectrical works
Furniture and fittings
Office equipment
$’000 $’000 $’000 $’000 $’000 $’000
Group
CostAs at 1.1.2017 55,562 21,512 54,738 60,349 60,936 13,639Additions – 154 4,123 4,305 9,759 1,749Reclassifications – – – 3 114 –Write offs – – (9,232) (9,510) (7,554) (1,323)Disposals (1,111) – (527) (116) (166) (7)Translation difference (74) (230) (514) (834) (1,480) (134)
As at 31.12.2017 and 1.1.2018 54,377 21,436 48,588 54,197 61,609 13,924
Additions – – 5,544 4,096 10,963 3,531Reclassifications – – 1,019 282 86 7Write offs – – (2,173) (3,220) (2,897) (960)Disposals – – (122) (11) – (1)Translation difference (47) 46 (265) 142 322 (49)
As at 31.12.2018 54,330 21,482 52,591 55,486 70,083 16,452
ANNUAL REPORT 2018 121.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
10. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Leasehold property
Leasehold land
Machinery and
equipmentElectrical works
Furniture and fittings
Office equipment
$’000 $’000 $’000 $’000 $’000 $’000
Group
Accumulated depreciation and impairment losses
As at 1.1.2017 4,961 1,489 34,116 41,672 42,346 10,525Charge for the year 1,061 410 5,595 7,041 7,211 1,477Write offs – – (8,665) (9,028) (6,890) (1,275)Disposals (604) – (426) (66) (94) (2)Impairment loss/ (write back) – – (33) (154) (131) –Translation difference (26) (31) (351) (645) (1,162) (116)
As at 31.12.2017 and 1.1.2018 5,392 1,868 30,236 38,820 41,280 10,609
Charge for the year 1,028 408 5,892 6,010 6,336 1,722Write offs (1,890) (3,045) (2,612) (965)Disposals – – (74) (1) – (1)Impairment loss/ (write back) – – – (91) (90) –Translation difference (31) 8 (137) 126 321 (32)
As at 31.12.2018 6,389 2,284 34,027 41,819 45,235 11,333
Net carrying amountAs at 1.1.2017 50,601 20,023 20,622 18,677 18,590 3,114
As at 31.12.2017 48,985 19,568 18,352 15,377 20,329 3,315
As at 31.12.2018 47,941 19,198 18,564 13,667 24,848 5,119
BREADTALK GROUP122.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
10. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Renovation(1) Motor vehiclesConstruction-in-progress Total
$’000 $’000 $’000 $’000
GroupCostAs at 1.1.2017 138,347 2,477 3,842 411,402Additions 11,144 115 1,638 32,987Reclassifications 324 – (441) –Write offs (17,470) (56) – (45,145)Disposals (1,130) (46) – (3,103)Translation difference (1,080) (43) (47) (4,436)
As at 31.12.2017 and 1.1.2018 130,135 2,447 4,992 391,705Additions 14,425 338 8,790 47,687Reclassifications 634 – (2,028) –Write offs (10,872) (42) – (20,164)Disposals (192) (53) – (379)Translation difference (1,894) (22) (306) (2,073)
As at 31.12.2018 132,236 2,668 11,448 416,776
Renovation(1) Motor vehiclesConstruction-in-progress Total
$’000 $’000 $’000 $’000
GroupAccumulated depreciation and impairment lossesAs at 1.1.2017 94,060 1,570 – 230,739Charge for the year 16,884 366 – 40,045Write offs (16,667) (51) – (42,576)Disposals (835) (46) – (2,073)Impairment loss/(write back) (120) – – (438)Translation difference (727) (31) – (3,089)
As at 31.12.2017 and 1.1.2018 92,595 1,808 – 222,608Charge for the year 19,005 367 – 40,768Write offs (10,074) (42) – (18,628)Disposals (192) (50) – (318)Impairment loss/ (write back) 28 – – (153)Translation difference (1,157) (12) – (914)
As at 31.12.2018 100,205 2,071 – 243,363
Net carrying amountAs at 1.1.2017 44,287 907 3,842 180,663
As at 31.12.2017 37,540 639 4,992 169,097
As at 31.12.2018 32,031 597 11,448 173,413
(1) Additions to renovation during the year include provision for reinstatement costs of $1,095,000 (31 December 2017: $2,681,000, 1 January 2017: $2,090,000).
ANNUAL REPORT 2018 123.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
10. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Assets written off
Property, plant and equipment written off during the year arose mainly due to the refurbishment/closure of certain bakery outlets and food courts. The amount written off represents the total carrying value of the property, plant and equipment attributable to the bakery outlets and food courts at the date of refurbishment/closure.
Assets pledged as security
The Group has the following assets pledged to secure the Group’s bank loans (Note 26).
Group and Company2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Leasehold land 17,070 17,404 17,584Leasehold property 47,005 47,925 48,845
64,075 65,329 66,429
Impairment of assets
During the financial year, the Group carried out a review of the recoverable amount of the plant and equipment in the outlets of its bakery, restaurant and food court segments. A net write-back of impairment of $153,000 (2017: $438,000), representing the write-back of these plant and equipment to the recoverable amount was recognised in “Administrative expenses” line item of profit or loss for the financial year ended 31 December 2018.
Capitalisation of borrowing costs
The Group’s leasehold property includes borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of leasehold property. The borrowing costs capitalised as cost of property, plant and equipment amounted to $145,000 (2017: $145,000).
BREADTALK GROUP124.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
10. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Leasehold property Leasehold land
Machinery and equipment
Electrical works
Furniture and fittings
$’000 $’000 $’000 $’000 $’000
CompanyCostAs at 1.1.2017 52,072 18,731 384 2,244 3,025Additions – 154 112 47 5,088
As at 31.12.2017 and 1.1.2018 52,072 18,885 496 2,291 8,113Additions – – 9 228 4,629
As at 31.12.2018 52,072 18,885 505 2,519 12,742
Accumulated depreciationAs at 1.1.2017 3,227 1,147 234 1,465 943Charge for the year 920 334 92 446 881
As at 31.12.2017 and 1.1.2018 4,147 1,481 326 1,911 1,824Charge for the year 920 334 72 314 183
As at 31.12.2018 5,067 1,815 398 2,225 2,007
Net carrying amount
As at 1.1.2017 48,845 17,584 150 779 2,082
As at 31.12.2017 47,925 17,404 170 380 6,289
As at 31.12.2018 47,005 17,070 107 294 10,735
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10. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Office equipment Renovation Total
$’000 $’000 $’000
CompanyCost
As at 1.1.2017 1,923 4,783 83,162Additions 234 189 5,824
As at 31.12.2017 and 1.1.2018 2,157 4,972 88,986Additions 1,664 632 7,162
As at 31.12.2018 3,821 5,604 96,148
Accumulated depreciationAs at 1.1.2017 1,673 3,221 11,910Charge for the year 199 976 3,848
As at 31.12.2017 and 1.1.2018 1,872 4,197 15,758Charge for the year 346 624 2,793
As at 31.12.2018 2,218 4,821 18,551
Net carrying amount
As at 1.1.2017 250 1,562 71,252
As at 31.12.2017 285 775 73,228
As at 31.12.2018 1,603 783 77,597
BREADTALK GROUP126.
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11. INVESTMENT PROPERTIES
Group and Company2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Balance sheet:At 1 January 39,463 22,984 24,053Additions – 16,681 –Net gains from fair value adjustments
recognised in profit or loss (Note 4) 1,081 118 2Exchange differences (796) (320) (1,071)
At 31 December 39,748 39,463 22,984
The investment properties held by the Group as at 31 December are as follows:
Description and Location Existing Use TenureUnexpired lease
term
18 units office space located in Xuhui district, Shanghai, The Peoples’ Republic of China
Offices Leasehold 43 years
2 level shop house located in Holland Village, Lorong Mambong, Singapore
Restaurant and Gymnasium
Freehold N.A.
The Group has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance or enhancements.
Valuation of investment properties
The investment properties located in Shanghai and Singapore are stated at fair value, which have been determined based on valuations performed at financial year end. The valuations were performed by上海沪港房地产估价有限公司and RHT Chestertons Valuation and Advisory Pte Ltd. They are independent real estate valuation experts with a recognised and relevant professional qualification and with recent experience in the location and category of the property being valued. Details of the valuation technique and inputs used are disclosed in Note 34.
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12. INTANGIBLE ASSETS
Group
Goodwill Brand value Trade markFranchise
rightsLocation premium Total
$’000 $’000 $’000 $’000 $’000 $’000
CostAs at 1.1.2017 6,173 3,209 1,855 1,806 474 13,517Additions – – 25 84 – 109Write off – – – (54) – (54)Translation difference – – (8) (11) – (19)
As at 31.12.2017 and 1.1.2018 6,173 3,209 1,872 1,825 474 13,553Additions – – 352 148 – 500Write off – – (115) – – (115)Translation difference – – (35) 17 – (18)
As at 31.12.2018 6,173 3,209 2,074 1,990 474 13,920
Accumulated amortisation and impairment losses
As at 1.1.2017 1,336 2,569 1,148 1,557 474 7,084Amortisation – 213 141 83 – 437Write off – – – (54) – (54)Translation difference – – (2) (1) – (3)
As at 31.12.2017 and 1.1.2018 1,336 2,782 1,287 1,585 474 7,464Amortisation – 213 119 82 – 414Write off – – (38) – – (38)Translation difference – – (8) 17 – 9
As at 31.12.2018 1,336 2,995 1,360 1,684 474 7,849
Net carrying amount As at 1.1.2017 4,837 640 707 249 – 6,433
As at 31.12.2017 4,837 427 585 240 – 6,089
As at 31.12.2018 4,837 214 714 306 – 6,071
BREADTALK GROUP128.
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12. INTANGIBLE ASSETS (CONT’D)
Brand value, trademark, franchise rights and location premium are determined to have finite useful lives and are amortised on a straight-line basis over their respective estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. Brand value, trademark and franchise rights have remaining useful lives of 1 year (31 December 2017: 2 years, 1 January 2017: 3 years), 1 to 10 years (31 December 2017: 1 to 10 years, 1 January 2017: 1 to 10 years) and 1 to 6 years (31 December 2017: 1 to 6 years, 1 January 2017: 1 to 6 years) as at 31 December 2018 respectively.
Amortisation expense is included in “Administrative expenses” in profit or loss.
Impairment testing of goodwill
Goodwill arising from the acquisition of Topwin Investment Holding Pte Ltd and its subsidiaries in the financial year ended 31 December 2005 was primarily attributable to the food court operations in Shanghai.
Goodwill on the acquisition of MWA Pte Ltd in December 2007 was primarily attributable to the food court operations in Singapore.
The food courts located in the same geographical segment are managed by the same management team.
The carrying amounts of goodwill allocated to each cash generating unit (“CGU”) are as follows:
Carrying amount
as at 31.12.18
Carrying amount
as at 31.12.17
Carrying amount
as at 1.1.2017
Pre-tax discount
rate 31.12.2018
Pre-tax discount
rate 31.12.2017
Pre-tax discount
rate 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Food court operations in:– Shanghai 3,569 3,569 3,569 12.0% 13.5% 12.0%– Singapore 1,268 1,268 1,268 9.0% 10.0% 10.0%
4,837 4,837 4,837
The recoverable amount is determined based on a fair value less costs of disposal calculation using the cash flow projections based on financial budgets approved by management covering a three-year period, less costs of disposal. The discount rates applied to the cash flow projections are derived from cost of capital plus a reasonable risk premium at the date of assessment of the respective cash generating units.
As the fair value measurement uses unobservable inputs, it is categorised as level 3 under the fair value hierarchy.
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12. INTANGIBLE ASSETS (CONT’D)
Key assumptions used in the fair value less costs of disposal calculations
The calculations of fair value less cost of disposal for the CGUs are most sensitive to the following assumptions:
Budgeted gross margins – Gross margins are based on budgets approved by management.
Growth rates – The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industry relevant to the CGUs.
Pre-tax discount rates – Discount rates represent the current market assessment of the risks specific to each CGU, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its cash-generating units and derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest bearing borrowings the Group is obliged to service. Segment–specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data.
Costs of disposal – Costs of disposal are incremental costs directly attributable to the disposal of an asset or cash generating unit, excluding finance costs and income tax expense.
Sensitivity to changes in assumptions
With regards to the assessment of fair value less costs of disposal for Singapore and Shanghai segments, management believes that no reasonably possible changes in any of the key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.
13. INVESTMENT SECURITIES
(a) Financial instruments as at 31 December 2018
Group2018
$’000
At fair value through profit or loss – Equity instruments (quoted) 142– Equity instruments (unquoted) 58,703– 3% SGD junior bonds due on 20 January 2020 (unquoted) 16,819– 10% SGD junior bonds on 24 April 2025 (unquoted) 7,485– Structured investment (unquoted) 4,797
87,946
Net carrying amountCurrent 4,797Non-current 83,149
87,946
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13. INVESTMENT SECURITIES (CONT’D)
(b) Financial instruments as at 31 December 2017 and 1 January 2017
Group31.12.2017 1.1.2017
$’000 $’000
Current:Available-for-sale financial assets– Equity instruments (unquoted), at cost – 18– Redeemable preference shares (unquoted), at cost – 5,067
– 5,085Held-to-maturity investments– Debt securities (quoted) 12,886 –– 5% SGD junior bonds (unquoted) – 12,137
12,886 12,137
Total 12,886 17,222
Non-Current:Available-for-sale financial assets– Equity instruments (quoted), at fair value 200 1,010– Equity instruments (unquoted), at cost 45,372 45,372
45,572 46,382
Held-to-maturity investments – 3% SGD junior bonds due on 20 January 2020 (unquoted) 18,000 18,000– 10% SGD junior bonds due on 24 April 2025 (unquoted) 8,496 8,496
26,496 26,496
Total 72,068 72,878
3% SGD junior bonds
On 10 February 2012, Imagine Properties Pte Ltd (“IPPL”) had completed the subscription of $18,000,000 in principal amount of junior bonds and was issued 72 ordinary shares of $1.00 per ordinary share in the share capital of Perennial (Chijmes) Pte Ltd (“PCPL”). IPPL’s investment in ordinary shares of PCPL is classified as an investment in associate (Note 15).
The junior bonds mature on 20 January 2020 and bear interest semi-annually in arrears, at minimum 3% per annum from 1 January 2013.
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13. INVESTMENT SECURITIES (CONT’D)
10% SGD junior bonds and equity instrument (unquoted) in Perennial 8 Shenton Investors Pte Ltd.
On 24 April 2015, IPPL had completed the subscription of $8,496,000 in principal amount of junior bonds and was issued 8,496 ordinary shares of $1,280 per share (aggregate issue price of $10,874,880) in the share capital of Perennial 8 Shenton Investors Pte Ltd (“P8SIPL”).IPPL’s investment in ordinary shares of P8SIPL is classified as an unquoted equity instrument.
The junior bonds mature on 2025 and bear interest semi-annually in arrears, at maximum 10% per annum from 24 April 2016.
Equity instruments (unquoted)
On 30 September 2012, IPPL together with a consortium of investors, entered into a joint venture agreement to invest in Perennial Tongzhou Development Pte Ltd (“PTD”) for the subscription of ordinary shares of PTD. IPPL’s subscription of 20,130 ordinary shares for a cash consideration of $20,130,000 represents a 5.27% equity interest in PTD. On 12 March 2014, the shareholders of PTD agreed to an additional capital injection in PTD, of which IPPL’s proportionate share of the capital call was $347,000. 347,000 shares was allotted to IPPL on 14 March 2014.
On 15 April 2013, IPPL together with a consortium of investors, entered into a joint venture agreement to invest in Perennial Tongzhou Holdings Pte Ltd (“PTH”) for the subscription of ordinary shares of PTH. IPPL’s subscription of 14,520 ordinary shares for a cash consideration of $14,520,000 represents a 5.86% equity interest in PTH.
On 3 January 2018, IPPL together with a consortium of investors, entered into a joint venture agreement to invest in Perennial HC Holdings Pte Ltd (“PHCH”) for the subscription of ordinary shares of PHCH. IPPL will eventually subscribed to 25,000,000 ordinary shares at US$1 per share, representing 5% equity interest in PHCH. The investment will be funded progressively upon capital call. As at 31 December 2018, a total of 6,918,250 ordinary shares has been subscribed for a cash consideration of $9,427,000, representing 5% equity interest in PHCH.
Debt securities
During the financial year 2017, a subsidiary, BTG Vault Pte Ltd (“BTGV”) purchased leveraged credit linked investment products through a reputable bank in Singapore. BTGV purchased additional investment amounting to $1,012,000 during the year. The leveraged credit linked investments yield periodic interest income at a net effective interest rate between 7.1% and 8.7% per annum. The leveraged credit linked investments has matured during the year.
Structured investment
During the year, BTGV purchased three autocallable structured investments through a reputable bank in Singapore for a consideration of $13,000,000. The autocallable structured investments will act as natural hedge against foreign currency exchange fluctuation. Two of the autocallable structured investments have been disposed during the year. The remaining autocallable investment will mature in May 2019.
Investments pledged as security
The Group’s investments in unquoted equity instruments of $26,197,000 (2017: $25,242,000) and junior bonds of $24,304,000 (2017: $26,496,000) have been pledged as security for bank loans (Note 26).
Fair value adjustments
During the financial year, fair value adjustments of $1,918,000 (FY17: nil) was brought to profit and loss in respect of investment securities.
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14. INVESTMENT IN SUBSIDIARIES
2018 2017$’000 $’000
Unquoted equity shares at cost 28,864 28,864Capital contributions in the form of share options issued to employees
of subsidiaries 949 858Impairment losses:– Unquoted shares (5,304) (5,304)
24,509 24,418
(a) Composition of the Group
The Group has the following investment in subsidiaries:
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held by the Company
BreadTalk Pte Ltd (1) Singapore Bakers and manufacturers of and dealers in bread, flour and biscuits
100 100 100
Together Inc. Pte Ltd (3) Singapore Investment holding 100 100 100 BreadTalk International Pte Ltd (3)
Singapore Investment holding 100 100 100
Topwin Investment Holding Pte Ltd (3)
Singapore Investment holding 100 100 100
Star Food Pte Ltd (3) Singapore Investment holding 100 100 100 Imagine IHQ Pte Ltd (3) Singapore Investment holding 100 100 100 Imagine Properties Pte Ltd (1) Singapore Investment holding 100 100 100 BTG Vault Pte Ltd (3) Singapore Acquiring and holding of
intellectual property rights100 100 100
Held through BreadTalkPte Ltd
Thye Moh Chan Pte Ltd (3) Singapore Wholesale of confectionery and bakery products
100 100 100
Queens Coffee Pte Ltd (3) Singapore Processing, sale and
distribution of premium coffee beans and tea dust; and distribution of related processing equipment
100 100 100
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through TogetherInc. Pte Ltd
Ramen Play Pte Ltd (3) Singapore Operators of restaurants 85 85 85
Taster Food Pte Ltd (1) Singapore Operators of food and drinks outlets, eating houses and restaurants
70 70 70
Taster Food UK Limited (11) England and Wales
Operators of restaurants 50.5 100 100
BTG-Song Fa Venture Pte Ltd (3)
Singapore Operators of restaurants 90 90 –
BTG-Shinmei Venture Pte Ltd (3) (Note (e))
Singapore General wholesale trading 66 – –
BTG-WPC Venture Pte Ltd (11) (Note (e))
Singapore Manufacture and wholesale of bakery confectionary products
80 – –
BTG-Pindao Venture Pte Ltd (3) (Note (e))
Singapore Operators of cafes and coffee houses
90 – –
Held through BTG-SongFa Venture Pte Ltd
Song Yu (Shanghai) Management Co., Ltd (2)
People’s Republic of
China
Operators of restaurants 100 100 –
Song Yu (Beijing) Management Co., Ltd (11) (Note (e))
People’s Republic of
China
Operators of restaurants 100 – –
BT SF Corporation (Thailand) Co., Ltd (9) (Note (e))
Thailand Investment holding 48.8(16) – –
BT Song Fa (Thailand) Co., Ltd (9) (Note (e))
Thailand Operators of restaurants 49(17) – –
Held through BT SongFa (Thailand) Co., Ltd
BT SF Corporation (Thailand) Co., Ltd (9) (Note (e))
Thailand Investment holding 50.9(16) – –
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through BTG-PindaoVenture Pte Ltd
BTG-Song Fa-Pindao Venture Pte Ltd (11) (Note (e))
Singapore Operators of restaurants 90 – –
Held through Taster FoodPte Ltd
Taster Food InternationalPte Ltd (3)
Singapore Investment holding 90 90 90
Held through Taster FoodInternational Pte Ltd
Taster Food Corporation (Thailand) Co., Ltd (9) (10)
(Note (e))
Thailand Investment holding 48.9(15) – –
Taster Food (Thailand)Co., Ltd (9)
Thailand Operators of restaurants 49(12) 49(12) 49(12)
Held through Taster FoodCorporation (Thailand)Co., Ltd
Taster Food (Thailand)Co., Ltd (9)
Thailand Operators of restaurants 50.9(12) – –
Held through Taster Food(Thailand) Co., Ltd
Taster Food Corporation (Thailand) Co., Ltd (9)
(Note (e))
Thailand Investment holding 50.9(15) – –
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through BreadTalkInternational Pte Ltd
BreadTalk Investment Holdings Co., Ltd (11)
(Note (e))
People’s Republic of
China
Investment holding 100 – –
Shanghai BreadTalkCo., Ltd (2)
People’s Republic of
China
Bakers and manufacturers of and dealers in bread, flour and biscuits
100 100 100
Shanghai BreadTalk Gourmet Co., Ltd (2)
People’s Republic of
China
Management of food and beverage, manufacture and retail of bakery, confectionery products
100 100 100
Beijing BreadTalk Restaurant Management Co., Ltd (2)
People’s Republic of
China
Management of food and beverage, manufacture and retail of bakery, confectionery products
100 100 100
BreadTalk (Thailand) Co., Ltd (9)
Thailand Management of food and beverage, manufacture and retail of bakery, confectionery products
49 (13) 49 (13) 49 (13)
BreadTalk Corporation (Thailand) Co., Ltd (9)
Thailand Investment holding 49 (14) 49 (14) 49 (14)
PT BTG Pura Indah Berkat Venture (11) (Note (e))
Indonesia Bakers and manufacturers of and dealers in bread, flour and biscuits
70 – –
ML Breadworks Sdn Bhd (4) Malaysia Dormant 100 100 90
Held through BreadTalkInvestment Holdings Co., Ltd
BreadTalk Jiaxing Food Manufacturing Co., Ltd (11) (Note (e))
People’s Republic of
China
Investment holding 100 – –
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through ShanghaiBreadTalk Co., Ltd
Shanghai Ramen PlayCo., Ltd (5)
People’s Republic of
China
Operators of restaurants 30(20) 30(20) 30(20)
Held through BeijingBreadTalk RestaurantManagement Co., Ltd
Beijing BreadTalk Co., Ltd (2) People’s Republic of
China
Manufacture and sale of bakery and confectionery products
100 100 100
Held through BreadTalk(Thailand) Co., Ltd
BreadTalk Corporation (Thailand) Co., Ltd (9)
Thailand Investment holding 50.9 (14) 50.9 (14) 50.9 (14)
Held through BreadTalkCorporation (Thailand)Co., Ltd
BreadTalk (Thailand)Co., Ltd (9)
Thailand Management of food and beverage, manufacture and retail of bakery, confectionery products
51 (13) 51 (13) 51 (13)
BT Song Fa (Thailand)Co., Ltd (9) (Note (e))
Thailand Operators of restaurants 51(17) – –
Held through TopwinInvestment Holding Pte Ltd
Food Republic (Shanghai) Co., Ltd (2)
People’s Republic of
China
Food court operator 100 100 100
Beijing Da Shi Dai Food and Beverage Co., Ltd (2)
People’s Republic of
China
Food court operator 100 100 100
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through TopwinInvestment Holding Pte Ltd(cont’d)
Megabite Hong Kong Limited (6)
Hong Kong Investment holding and food court operator
100 100 100
Food Republic Pte Ltd (1) Singapore Food court operator 100 100 100
FR International HoldingsPte Ltd (22)
Singapore Investment Holding – – 100
Megabite (S) Pte Ltd (21) Singapore Investment holding – 100 100 Megabite Eatery (M)Sdn Bhd (4)
Malaysia Operator of food and beverage outlets
100 100 100
Food Republic TaiwanCo., Ltd (8)
Taiwan Food court operator 100 100 100
FR (Cambodia) Co., Ltd (11) (Note (e))
Cambodia Food court operator 100 – –
FR (Thailand) Co., Ltd (9) (10) Thailand Food court operator 49(18) 49(18) 49(18)
FR Corporation (Thailand) Co., Ltd (9) (10) (Note (e))
Thailand Food court operator 49(19) – –
Held through FR Corporation(Thailand) Co., Ltd FR (Thailand) Co., Ltd (9) (10) (Note (e))
Thailand Food court operator 50.9(18) – –
Held through FR (Thailand)Co., Ltd FR Corporation (Thailand) Co., Ltd (9) (10) (Note (e))
Thailand Food court operator 50.9(19) – –
Held through FR InternationalHoldings Pte Ltd FR-AK Venture Pte Ltd (22) Singapore Operator of Food and
beverage outlets– – 70
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through Food Republic(Shanghai) Co., Ltd
Chongqing Food Republic Food & Beverage Management Co., Ltd (5)
People’s Republic of
China
Food court operator 100 100 100
Food Republic (Chengdu) Co., Ltd (5)
People’s Republic of
China
Food court operator 100 100 100
Food Republic Hangzhou F&B Co., Ltd (21)
People’s Republic of
China
Food court operator – 100 100
Shanghai Ramen Play Co., Ltd (5)
People’s Republic of
China
Operators of restaurants 30(20) 30(20) 30(20)
Shanghai Food Court F&B Management Co., Ltd (5)
People’s Republic of
China
Operator of food and beverage outlets
100 100 100
Held through Megabite HongKong Limited
BreadTalk Concept Hong Kong Limited (6)
Hong Kong Management of food and beverage, manufacture and retail of bakery, confectionery products
100 100 100
Food Republic Shenzhen F&B Management Co., Ltd (7)
People’s Republic of
China
Food court operator 100 100 100
Food Republic Guangzhou F&B Management Co., Ltd (7)
People’s Republic of
China
Food court operator 75 75 75
Held through Megabite (S)Pte Ltd
Food Art Pte Ltd (21) Singapore Dormant – 100 100
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14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(a) Composition of the Group (cont’d)
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through Star FoodPte Ltd
Shanghai Star Food F&B Management Co., Ltd (5)
People’s Republic of
China
Investment holding 100 100 100
Beijing Star Food F&B Management Co., Ltd (5)
People’s Republic of
China
Dormant 100 100 100
Held through Shanghai StarFood F&B ManagementCo., Ltd
Xu Chun (Shanghai) Management Co., Ltd (11)
(Note (e))
People’s Republic of
China
Operators of restaurants 80 – –
(1) Audited by Ernst & Young LLP, Singapore(2) Audited by member firms of Ernst & Young Global in the respective countries(3) Audited by Nexia TS Public Accounting Corporation, Singapore(4) Audited by Nexia SSY, Malaysia(5) Audited by Shanghai Shen Ya Certified Public Accountants Co., Ltd, People’s Republic of China(6) Audited by Nexia Charles Mar Fan Limited, Hong Kong(7) Audited by Guangdong Link Certified Public Accountants Co., Ltd, People’s Republic of China(8) Audited by KPMG, Taiwan(9) Audited by Tree Sun Co., Ltd, Thailand(10) Considered a subsidiary of the BTG as the Company has voting control at general meetings and Board meetings.(11) Not required to be audited during the financial year. (12) The Group holds 60.5% ownership interest in Taster Food (Thailand) Co., Ltd in 2018 and accounted for it as a subsidiary.
It is considered a subsidiary of the BTG as the Company has voting control at the general meetings and Board meetings.(13) The Group holds 100% ownership interest in BreadTalk (Thailand) Co., Ltd through BreadTalk International Pte Ltd and
BreadTalk Corporation (Thailand) Co., Ltd and accounted for it as a subsidiary.(14) The Group holds 99.9% ownership interest in BreadTalk Corporation (Thailand) Co., Ltd through BreadTalk International
Pte Ltd and BreadTalk (Thailand) Co., Ltd and accounted for it as a subsidiary.(15) The Group holds 99.7% ownership interest in Taster Food Corporation (Thailand) Co., Ltd through Taster Food International
Pte Ltd and Taster Food (Thailand) Co., Ltd and accounted for it as a subsidiary.(16) The Group holds 89.7% ownership interest in BT SF Corporation (Thailand) Co., Ltd through BTG-Song Fa Venture Pte
Ltd and BT Song Fa (Thailand) Co., Ltd and accounted for it as a subsidiary.(17) The Group holds 89.7% ownership interest in BT Song Fa (Thailand) Co., Ltd through BTG-Song Fa Venture Pte Ltd and
BreadTalk Corporation (Thailand) Co., Ltd and accounted for it as a subsidiary.(18) The Group holds 99.9% ownership interest in FR (Thailand) Co., Ltd through Topwin Investment Holding Pte Ltd and FR
Corporation (Thailand) Co., Ltd and accounted for it as a subsidiary.(19) The Group holds 99.9% ownership interest in FR Corporation (Thailand) Co., Ltd through Topwin Investment Holding Pte
Ltd and FR (Thailand) Co., Ltd and accounted for it as a subsidiary.(20) The Group holds 60% ownership interest in Shanghai Ramen Play Co., Ltd through Shanghai BreadTalk Co., Ltd and
Food Republic (Shanghai) Co., Ltd and accounted for it as a subsidiary.(21) The entity has been struck off during the year.(22) The entity has been struck off in 2017
BREADTALK GROUP140.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(b) Interests in subsidiaries with material non-controlling interests (“NCI”)
The Group has the following subsidiary that have NCI that are material to the Group.
Name of SubsidiaryPrincipal place
of business
Proportion of ownership
interest held by non-controlling
interest
Profit allocated to NCI during the reporting
period
Accumulated NCI at the end of reporting
period
Dividends payable to
NCI$’000 $’000 $’000
31 December 2018:
Taster Food Pte Ltd Singapore 30% 6,498 26,336 6,560
31 December 2017:
Taster Food Pte Ltd Singapore 30% 6,773 26,398 3,444
1 January 2017:
Taster Food Pte Ltd Singapore 30% 6,133 23,069 1,640
There are no significant restrictions on the Group’s ability to use or access assets and settle liabilities of the subsidiary with material non-controlling interests.
(c) Summarised financial information about subsidiary with material NCI
Summarised financial information including goodwill on acquisition and consolidation adjustments but before intercompany eliminations of subsidiaries with material non-controlling interests are as follows:
Summarised balance sheet
Taster Food Pte Ltd
2018As at
31.12.2017As at
1.1.2017$’000 $’000 $’000
CurrentAssets 123,509 107,250 84,306Liabilities (55,160) (40,920) (27,855)
Net current assets 68,349 66,330 56,451
Non-currentAssets 13,874 16,031 15,726Liabilities (1,512) (1,466) (1,439)
Net non-current assets 12,362 14,565 14,287
Net assets 80,711 80,895 70,738
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(c) Summarised financial information about subsidiaries with material NCI (cont’d)
Summarised statement of comprehensive income
Taster Food Pte Ltd2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Revenue 136,209 128,930 127,287
Profit before income tax 24,358 25,095 22,745Income tax expense (4,546) (4,445) (4,046)
Profit after tax – continuing operations 19,812 20,650 18,699Other comprehensive income – – –
Total comprehensive income 19,812 20,650 18,699
Other summarised information
Taster Food Pte Ltd2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Net cash flows from operations 38,771 28,738 24,049
Acquisition of significant property, plant and equipment 2,453 5,281 4,843
(d) Acquisition of non-controlling interests
On 1 June 2018, Taster Food Corporation (Thailand) Co., Ltd, a wholly owned indirect subsidiary of the Company, acquired an additional effective 30.9% equity interest in Taster Food (Thailand) Co., Ltd (“TFT”) from its non-controlling interests for a cash consideration of $419,000. As a result of this acquisition, TFT has become effectively a 60.5% owned subsidiary. The carrying value of net assets of TFT as at 1 June 2018 was $4,767,000 and the excess in carrying value of the additional interest acquired was $1,054,000. The cumulative amount of the consideration and the excess in the carrying value of the additional interest acquired has been recognised as “Premium on acquisition of non-controlling interests” within equity.
The following summarises the effect to the change in the Group’s ownership interest in TFT on the equity attributable to owners of the Company:
$’000
Consideration paid for acquisition of non-controlling interests (419)Decrease in equity attributable to non-controlling interests 1,473
Increase in equity attributable to owners of the Company 1,054
BREADTALK GROUP142.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(e) Incorporation of new subsidiaries
Taster Food Corporation (Thailand) Co., Ltd (“TFCT”)
TFCT was incorporated as a 99.7% owned subsidiary of Taster Food International Pte Ltd and Taster Food (Thailand) Co., Ltd on 26 April 2018 with a share capital of $4,000.
Song Yu (Beijing) Management Co., Ltd (“SYBJ”)
SYBJ was incorporated as a 100% owned subsidiary of BTG-Song Fa Venture Pte Ltd on 17 September 2018 with a share capital of $1,500,000.
BT SF Corporation (Thailand) Co., Ltd (“BTSFCT”)
BTSFCT was incorporated as a 99.7% owned subsidiary of BTG-Song Fa Venture Pte Ltd and BT Song Fa (Thailand) Co., Ltd on 24 May 2018 with a share capital of $4,000.
BT Song Fa (Thailand) Co., Ltd (“BTSFT”)
BTSFT was incorporated as a 100% owned subsidiary of BTG-Song Fa Venture Pte Ltd and BreadTalk Corporation (Thailand) Co., Ltd on 7 February 2018 with a share capital of $200,000.
BTG-Shinmei Venture Pte Ltd (“BTGS”)
BTGS was incorporated as a 66% owned subsidiary of Together Inc. Pte Ltd on 22 February 2018 with a share capital of $3,000,000.
BTG-WPC Venture Pte Ltd (“BTGWPCV”)
BTGWPCV was incorporated as a 80% owned subsidiary of Together Inc. Pte Ltd on 18 October 2018 with a share capital of $2,000,000.
BTG-Pindao Venture Pte Ltd (“BTGPDV”)
BTGPDV was incorporated as a 90% owned subsidiary of Together Inc. Pte Ltd on 22 June 2018 with a share capital of $3,000,000.
BTG-Song Fa-Pindao Venture Pte Ltd (“BTGSFPDV”)
BTGSFPDV was incorporated as a 90% owned subsidiary of BTG-Pindao Venture Pte Ltd on 16 October 2018 with a share capital of $3,000,000.
PT BTG Pura Indah Berkat Venture (“PTPURA”)
PTPURA was incorporated as a 70% owned subsidiary of BreadTalk International Pte Ltd on 7 May 2018 with a share capital of $230,000.
BreadTalk Investment Holdings Co., Ltd (“BTIH”)
BTIH was incorporated as a 100% owned subsidiary of BreadTalk International Pte Ltd on 10 October 2018 with a share capital of $4,500,000.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
14. INVESTMENT IN SUBSIDIARIES (CONT’D)
(e) Incorporation of new subsidiaries
BreadTalk Jiaxing Food Manufacturing Co., Ltd (“BTJXFM”)
BTJXFM was incorporated as a 100% owned subsidiary of BreadTalk Investment Holdings Co., Ltd on 24 October 2018 with a share capital of $4,400,000.
FR Corporation (Thailand) Co., Ltd (“FRCTH”)
FRCTH was incorporated as a 99.9% owned subsidiary of Topwin Investment Holding Pte Ltd and FR (Thailand) Co., Ltd on 25 October 2018 with a share capital of $1,000.
FR (Cambodia) Co., Ltd (“FRCAMB”)
FRCAMB was incorporated as a 100% owned subsidiary of Topwin Investment Holding Pte Ltd on 9 July 2018 with a share capital of $6,800.
Xu Chun (Shanghai) Management Co., Ltd (“XCSH”)
XCSH was incorporated as a 80% owned subsidiary of Shanghai Star Food F&B Management Co., Ltd on 5 June 2018 with a share capital of $1,666,000.
15. INVESTMENT IN ASSOCIATES
The Group’s material investments in associates are summarised below:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Carl Karcher Enterprises (Cayman) Ltd – 2,616 1,968Perennial (Chijmes) Pte Ltd 22,738 22,619 22,643Other associates 3,488 3,247 2,422
26,226 28,482 27,033Impairment loss – (1,800) –
At end of year 26,226 26,682 27,033
BREADTALK GROUP144.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
15. INVESTMENT IN ASSOCIATES (CONT’D)
Details of the associates are as follows:
NameCountry of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through subsidiaries
Perennial (Chijmes) Pte Ltd (“PCPL”) (1)
Singapore Investment holding 29 29 29
JBT (China) Pte Ltd (“JBTC”) (2)
Singapore Investment holding 30 30 30
Tate Projects Pte Ltd (3) Singapore General building contractor 25 25 25
Carl Karcher Enterprises (Cayman) Ltd (“CKEC”) (4)
(Note (a))
Cayman Islands
Investment holding 31 40 40
Avenue Ambience Sdn Bhd (6) Malaysia Bakers and manufacturers of and dealers in bread, flour and biscuits
25 25 –
Shi Shi Le (Chong Qing) Co.,Ltd (6) (Note (b))
People’s Republic of
China
Bakers and manufacturers of and dealers in bread, flour and biscuits
30 – –
Held by PCPL
Pre 8 Investments Pte Ltd (1) Singapore Operators of commercial malls
100 100 100
Held by JBTCJBT (Shanghai) Co., Ltd (5) People’s
Republic of China
Operators of restaurants 100 100 100
Held by CKEC
Carl Karcher Enterprises (HK) Limited (4)
Hong Kong Investment holding 100 100 100
CKE (Shanghai) F&B Management Limited (4)
People’s Republic of
China
Operators of restaurants 100 100 100
(1) Audited by KPMG LLP, Singapore(2) Audited by Deloitte LLP, Singapore(3) Audited by Leethen & Associates, Singapore(4) Audited by KPMG Huazhen, People’s Republic of China (5) Audited by Shanghai Shen Ya Certified Public Accountants Co., Ltd, People’s Republic of China(6) Audited by PricewaterhouseCoopers PLT, Chartered Accountant, Malaysia
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
15. INVESTMENT IN ASSOCIATES (CONT’D)
(a) Dilution of interests in associate
During the year, a wholly owned subsidiary, Star Food Pte Ltd did not participate in CKEC’s capital funding exercise. Consequently the shareholdings in CKEC was diluted to 31% (FY2017: 40%).
The Group has not recognised losses relating to CKEC where its share of losses have exceeded the Group’s interest in this associate. The Group’s current and cumulative share of unrecognised losses at the end of the reporting period was $2,606,000 (31 December 2017: nil, 1 January 2017: nil). The Group has no obligation in respect of the losses.
(b) Investment in new associate
During the year, Shanghai BreadTalk Gourmet Co., Ltd, a wholly owned subsidiary, injected share capital of $477,000, representing 30% shareholdings in Shi Shi Le (Chong Qing) Co., Ltd.
For the financial year, $60,000 dividends (2017: nil) were received from associates. All associates are not restricted by regulatory requirements on the distribution of dividends.
Impairment loss recognised
During the year, no impairment loss was recognised (2017: $1,800,000).
Aggregate information about the Group’s investments in associates that are not individually material are as follows:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
(Loss)/profit after tax from continuing operations (3,761) 2,172 1,901Other comprehensive income – – –
Total comprehensive income (3,761) 2,172 1,901
The summarised financial information in respect of PCPL, based on its management accounts and reconciliation with the carrying amount of the investment in the consolidated financial statements are as follows:
BREADTALK GROUP146.
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15. INVESTMENT IN ASSOCIATES (CONT’D)
Summarised balance sheet
PCPL2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Current assets 7,867 8,281 9,936Non-current assets [1] 334,382 334,141 333,749
Total assets 342,249 342,422 343,685
Current liabilities (4,797) (6,110) (14,018)Non-current liabilities (259,046) (258,315) (251,588)
Total liabilities (263,843) (264,425) (265,606)
Net assets 78,406 77,997 78,079
Proportion of the Group’s ownership 29% 29% 29%Group’s share of net assets 22,738 22,619 22,643
Carrying amount of the investment 22,738 22,619 22,643
[1] Non-current assets include an investment property held by the associate. As at 31 December 2018, the carrying value of this investment property amounted to $334,000,000.
Summarised statement of comprehensive loss
PCPL2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Revenue 13,780 13,547 13,805Profit/(loss) after tax from continuing operations 409 (82) (144)
Total comprehensive profit/(loss) 409 (82) (144)
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
16. INVESTMENT IN JOINT VENTURES
The Group’s material investments in joint ventures are summarised below:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
BTM (Thailand) Ltd 3,945 5,016 3,557Shanghai ABPan Co., Ltd 3,920 3,753 3,681Apex Excellent Sdn Bhd 522 1,069 847Exchange differences 297 202 149
8,684 10,040 8,234
Details of the joint ventures are as follows:
Name Country of
incorporation Principal activities Proportion of ownership interest2018 31.12.2017 1.1.2017
% % %
Held through subsidiaries
Apex Excellent Sdn Bhd (1) Malaysia Food court operator 50 50 50
Shanghai ABPan Co., Ltd (“SHAB”) (2)
People’s Republic of
China
Manufacture and sale of frozen dough
50 50 50
BTM (Thailand) Ltd (“BTM”) (3) Thailand Management of food and beverage, manufacture and retail of bakery, confectionery products
50 50 50
(1) Audited by Nexia SSY, Malaysia(2) Audited by Ernst & Young Hua Ming LLP, People’s Republic of China(3) Audited by PricewaterhouseCoopers ABAS Ltd
BREADTALK GROUP148.
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16. INVESTMENT IN JOINT VENTURES (CONT’D)
The activities of the joint ventures are strategic to the Group’s activities. The Group jointly controls the joint ventures with other partners under contractual agreements that require unanimous consent to all major decisions over the relevant activities.
Aggregate information about the Group’s investments in joint ventures that are not individually material are as follows:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Profit or loss after tax from continuing operations 557 446 545Other comprehensive income – – –
Total comprehensive income 557 446 545
The summarised financial information in respect of SHAB and BTM, based on their management accounts and reconciliation with the carrying amount of the investment in the consolidated financial statements are as follows:
Summarised balance sheet
SHAB BTM2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Cash and cash equivalents 4,609 3,017 3,350 1,437 2,506 834Trade receivables – – – 1,241 1,276 1,707Other current assets 2,187 4,122 2,960 1,878 2,306 1,264
Current assets 6,796 7,139 6,310 4,556 6,088 3,805Non-current assets 2,372 2,285 3,650 9,432 9,759 8,793
Total assets 9,168 9,424 9,960 13,988 15,847 12,598
Current liabilities (1,349) (1,609) (2,099) (3,364) (4,441) (3,994)Non-current liabilities – – – (1,382) – –
Total liabilities (1,349) (1,609) (2,099) (4,746) (4,441) (3,994)
Net assets 7,819 7,815 7,861 9,242 11,406 8,604
Proportion of the Group’s ownership 50% 50% 50% 50% 50% 50%
Group’s share of net assets 3,910 3,908 3,931 4,621 5,703 4,302Other adjustments – – – (371) (516) (662)Exchange difference 10 (155) (250) (305) (171) (83)
Carrying amount of the investment 3,920 3,753 3,681 3,945 5,016 3,557
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16. INVESTMENT IN JOINT VENTURES (CONT’D)
Summarised statement of comprehensive income
SHAB BTM2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Revenue 9,835 12,244 11,820 24,599 23,871 17,981Operating expenses (9,378) (11,131) (10,760) (27,075) (23,218) (17,203)
Profit/(loss) before tax 457 1,113 1,060 (2,476) 653 778Income tax expense (137) (274) (288) 43 (38) (79)
Profit/(loss) after tax 320 839 722 (2,433) 615 699Other comprehensive
income – – – – – –
Total comprehensive income 320 839 722 (2,433) 615 699
Additional interests in joint venture, with no change in shareholdings
In the financial year 2017, BTM increased its share capital to $10,027,000. Proportionate to its shareholdings of 50% in BTM, a wholly owned subsidiary, BreadTalk (Thailand) Co., Ltd injected additional share capital of $1,005,000.
Dividends of $825,000 (2017: $348,000) were received from joint venture. All joint ventures are not restricted by regulatory requirements on the distribution of dividends.
17. INVENTORIES
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Balance sheet:
Raw materials and consumables, at cost 10,390 8,878 8,951Semi-finished goods 620 536 461Finished goods 294 307 394
Total inventories at lower of cost and net realisable value 11,304 9,721 9,806
Profit or loss:
Inventories recognised as an expense in cost of sales 139,877 142,640 136,148
Inclusive of the following charge:– Write-off of inventories 2 7 18– Allowance for inventory obsolescence 12 5 84
BREADTALK GROUP150.
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18. TRADE AND OTHER RECEIVABLES
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Trade receivables 6,640 7,495 6,438 – – –Other receivables 12,108 9,264 8,503 5,501 2,367 4,240Interest receivable 716 439 852 – – –Deposits 38,483 34,754 36,256 33 50 29
57,947 51,952 52,049 5,534 2,417 4,269Other receivables
(non-current) 838 1,107 1,413 – – –
58,785 53,059 53,462 5,534 2,417 4,269
Current 57,947 51,952 52,049 5,534 2,417 4,269Non-current 838 1,107 1,413 – – –
58,785 53,059 53,462 5,534 2,417 4,269
Other receivables include the following:
(a) Initial fee receivable of $2,077,000 (31 December 2017: $3,100,000, 1 January 2107: $3,706,000) from food atrium stall tenants. The initial fee receivable is a contribution from tenants mainly for renovation costs of the leased food atrium stalls.
Trade receivables
Trade receivables are non-interest bearing and are generally on 15 to 60 days terms (31 December 2017: 15 to 60 days, 1 January 2107: 15 to 60 days). They are recognised at their original invoice amounts which represents their fair values on initial recognition.
Trade receivables denominated in foreign currencies at 31 December are as follows:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
United States Dollar 183 – 275
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18. TRADE AND OTHER RECEIVABLES (CONT’D)
Receivables that are past due but not impaired
The Group has trade receivables amounting to $5,572,000 (31 December 2017: $4,577,000, 1 January 2017: $4,016,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Trade receivables past due: Lesser than 30 days 1,965 2,616 2,172 30 to 60 days 463 643 342 61 to 90 days 452 535 258 91 to 120 days 263 421 117 More than 120 days 2,429 362 1,127
5,572 4,577 4,016
Receivables that are impaired / partially impaired
The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
GroupIndividually impaired
31.12.2017 1.1.2017$’000 $’000
Trade receivables – nominal amounts 210 –Less: Allowance for impairment (210) –
– –
Movement in allowance accounts: At 1 January – 181Charge during the year 250 –Written back during the year (40) (181)
210 –
Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.
BREADTALK GROUP152.
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18. TRADE AND OTHER RECEIVABLES (CONT’D)
Expected credit losses
The movement in allowance for expected credit losses of trade receivables computed based on lifetime ECL are as follows:
Group2018
$’000
Movement in allowance accounts:At 1 January 238Charge for the year 31Written back during the year (209)
At 31 December 60
Other receivables
Other receivables (current) are non-interest bearing and are generally on 0 to 60 days terms (31 December 2017: 0 to 60 days, 1 January 2017: 0 to 60 days).
Other receivables that are past due but not impaired
The Group has other receivables amounting to $1,424,000 (31 December 2017: $1,870,000, 1 January 2017: $974,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Other receivables past due: Lesser than 30 days 1,117 575 559 30 to 60 days 6 1,101 83 61 to 90 days 21 40 30 91 to 120 days 1 28 53 More than 120 days 279 126 249
1,424 1,870 974
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18. TRADE AND OTHER RECEIVABLES (CONT’D)
Other receivables that are impaired / partially impaired
The Group’s other receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
GroupIndividually impaired
31.12.2017 1.1.2017$’000 $’000
Other receivables – nominal amounts 87 87Less: Allowance for impairment (87) (87)
– –
Movement in allowance accounts: At 1 January 87 33Charge during the year – 87Written off during the year – (33)
87 87
Other receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.
Expected credit losses
The movement in allowance for expected credit losses of other receivables computed based on lifetime ECL are as follows:
Group 2018
$’000
Movement in allowance accounts:At 1 January 105Charge for the year 138
At 31 December 243
BREADTALK GROUP154.
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19. DUE FROM/TO RELATED CORPORATIONS
Company2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Non-currentLoan to subsidiary 41,292 38,831 29,905Less: Impairment losses (10,519) (8,139) (3,137)
30,773 30,692 26,768
The loan to subsidiary has no fixed terms of repayment.
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Current
Amounts due from:Subsidiaries (non-trade) – – – 169,231 105,149 61,885Associate (trade) – 9 6 – – –Associate (non-trade) 211 1 – – – –Joint ventures (trade) 8 – 411 – – –Joint ventures (non-trade) 1,165 1,118 677 – – –Less: impairment loss (260) – – – – –
1,124 1,128 1,094 169,231 105,149 61,885
Amounts due to:Subsidiaries (non-trade) – – – 65,964 57,787 30,674Associate (non-trade) 968 1,348 1,108 – – –Joint ventures (trade) 2,018 2,458 2,617 – – –Joint ventures (non-trade) 38 75 178 – – –
3,024 3,881 3,903 65,964 57,787 30,674
The amounts due from/to related corporations (current) are to be settled in cash, unsecured, non-interest bearing and generally on 30 to 60 days term except for:
(i) loans to subsidiaries of $127,736,000 (31 December 2017: $52,738,000, 1 January 2017: $42,963,000) which are repayable on demand;
(ii) loan from a subsidiary of $65,681,000 (31 December 2017: $57,424,000, 1 January 2017: $29,325,000) which bears an effective interest rate of 1.9% (31 December 2017: 1.5%, 1 January 2017: 1.5%) per annum and is repayable on demand.
ANNUAL REPORT 2018 155.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
19. DUE FROM/TO RELATED CORPORATIONS (CONT’D)
Receivables that are past due but not impaired
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Amounts due from associate (trade)61 to 90 days – 9 6
Total as at 31 December – 9 6
Amounts due from associate (non-trade)30 to 60 days 10 – –61 to 90 days 1 1 –
Total as at 31 December 11 1 –
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Amounts due from joint ventures (trade)Lesser than 30 days – – 1830 to 60 days – – 5561 to 90 days – – 1191 to 120 days – – 2
Total as at 31 December – – 86
Amounts due from joint ventures (non-trade)Lesser than 30 days 53 133 830 to 60 days 15 14 761 to 90 days 14 24 891 to 120 days 12 57 7More than 120 days 187 68 44
Total as at 31 December 281 296 74
Expected credit losses
The movement in allowance for expected credit losses of due from related corporations computed based on lifetime ECL are as follows:
Group2018
$’000
Movement in allowance accounts:At 1 January and 31 December 260
BREADTALK GROUP156.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
19. DUE FROM/TO RELATED CORPORATIONS (CONT’D)
Company2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Amounts due from subsidiaries (non-trade)Lesser than 30 days 4,213 15,751 1,79530 to 60 days 19,207 1,919 1,91961 to 90 days 33,878 45 2,58491 to 120 days 112 1,713 1,301More than 120 days 100,695 31,635 9,680
Total as at 31 December 158,105 51,063 17,279
20. CASH AND CASH EQUIVALENTS
(a) Cash and cash equivalents
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Fixed deposits (current) 7 6 5,017 – – 5,011
Cash on hand and at bank 184,968 141,239 115,572 15,729 1,278 3,475
184,975 141,245 120,589 15,729 1,278 8,486
Fixed deposits of the Group have a maturity period of 3 months (31 December 2017: 3 months, 1 January 2017: 3 months) with effective interest rates of 1.70% (31 December 2017: 0.96%, 1 January 2017: 0.88%) per annum.
Cash and cash equivalents denominated in foreign currencies are as follows:
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
United States Dollar 3,100 314 639 – – –
ANNUAL REPORT 2018 157.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
21. TRADE AND OTHER PAYABLES
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Financial liabilitiesTrade payables 20,865 20,718 21,062 – – –Other payables– Other creditors 16,830 12,094 12,587 1,083 641 768– Payable for purchase
of property, plant and equipment 3,456 4,674 4,760 – – –
– Sales collection on behalf of tenants 23,600 21,609 20,250 – – –
Deposits 22,990 25,027 24,111 1,388 1,177 1,064Dividend payable 6,560 3,444 1,640 – – –
94,301 87,566 84,410 2,471 1,818 1,832Non-financial liabilitiesGST payable 3,223 2,760 1,994 898 357 123
97,524 90,326 86,404 3,369 2,175 1,955
The deposits refer to deposits from food court tenants and franchisees.
Dividend is payable to non-controlling shareholders of a subsidiary.
Trade payables/other payables
These amounts are non-interest bearing. Trade payables are normally settled on 0 to 60 days terms (31 December 2017: 0 to 60 days terms, 1 January 2017: 0 to 60 days terms) while other payables have an average term of 0 to 90 days terms (31 December 2017: 0 to 90 days terms, 1 January 2017: 0 to 90 days terms), except for retention sums which have repayment terms of up to 1 year.
Trade payables denominated in foreign currencies are as follows:
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
United States Dollar 293 283 253
BREADTALK GROUP158.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
22. OTHER LIABILITIES
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Financial liabilities, currentAccrued operating expenses 51,768 50,630 41,912 7,033 7,012 3,395Accrual for amounts payable
for purchase of property plant and equipment 222 361 135 – – –
Financial guarantees – – – 576 576 576
51,990 50,991 42,047 7,609 7,588 3,971
Non-financial liabilities, current
Deferred revenue 23,047 24,457 25,405 – – –Deferred rent 3,620 3,262 2,160 – – –
26,667 27,719 27,565 – – –
Non-financial liabilities, non- current
Deferred rent 7,641 9,392 11,385 – – –
34,308 37,111 38,950 – – –
86,298 88,102 80,997 7,609 7,588 3,971
Current 78,657 78,710 69,612 7,609 7,588 3,971Non-current 7,641 9,392 11,385 – – –
86,298 88,102 80,997 7,609 7,588 3,971
Deferred rent represents the difference between the lease payments and lease expenses recognised on straight-line basis over the lease term.
ANNUAL REPORT 2018 159.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
23. PROVISION FOR REINSTATEMENT COSTS
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
At 1 January 15,846 14,417 15,002 27 27 25Additions 1,095 2,681 2,090 – – 2Utilisation (1,001) (927) (2,339) – – –Write-back during the year (99) (82) (292) – – –Exchange differences (73) (243) (44) – – –
Total as at 31 December 15,768 15,846 14,417 27 27 27
Provision for reinstatement costs is recognised when the Group enters into a lease agreement for the premises. It includes the estimated cost of demolishing and removing all the leasehold improvements made by the Group to the premises. The premises shall be reinstated to the condition set up in the lease agreements upon the expiration of the lease agreements. During the year, the Group incurred reinstatement costs for certain closed outlets and an excess provision of $99,000 (2017: $82,000) was written-back.
24. DUE FROM/LOAN FROM NON-CONTROLLING SHAREHOLDERS OF SUBSIDIARIES
The amounts due from and current loan from non-controlling shareholders of subsidiaries are to be settled in cash, unsecured, non-interest bearing and repayable on demand.
The non-current loan from a non-controlling shareholder of a subsidiary is unsecured and non-interest bearing. The loan has no fixed terms of repayment and is to be settled when the cash flow of the subsidiary permits.
25. SHORT-TERM LOANS
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Bank loans– Singapore Dollar – 10,000 – – 10,000 –– New Taiwan Dollar 4,138 6,435 4,883 – – –– Thailand Baht 1,806 2,802 2,332 – – –
5,944 19,237 7,215 – 10,000 –
The effective interest on these short-term loans range from 2.8% to 3.8% (31 December 2017: 1.61% to 3.50%, 1 January 2017: 1.56% to 6.86%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.
The bank loans are revolving credit facilities with a tenure of 6 months (31 December 2017: 6 months, 1 January 2017: 6 months).
BREADTALK GROUP160.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
26. LONG-TERM LOANS
Group CompanyTerm loans Maturity 2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Singapore Dollar 2018 – 2,860 6,569 – – –
Singapore Dollar 2028 (Note 1) 19,368 38,214 41,793 19,368 38,214 41,793
Singapore Dollar 2018 – 1,584 2,127 – 1,584 2,127
Singapore Dollar 2019 (Note 2) 236 1,684 3,215 – – –
Singapore Dollar 2019 (Note 3) 12,000 30,000 43,778 – – –
Singapore Dollar 2022 (Note 4) 12,742 13,500 – – – –
Hong Kong Dollar 2020 290 475 1,015 – – –
Chinese Yuan 2023 319 – 301 – – –
Malaysia Ringgit 2018 – 80 297 – – –
Thailand Baht 2022 525 – – – – –
45,480 88,397 99,095 19,368 39,798 43,920
Current portion 16,631 37,864 24,238 3,348 4,122 4,122Non-current portion 28,849 50,533 74,857 16,020 35,676 39,798
45,480 88,397 99,095 19,368 39,798 43,920
Note 1 – the term loans are secured by a charge over the Company’s leasehold land and property. The loans will mature in 2028. They include the following financial covenants which require the Group to maintain:
– a gearing ratio not exceeding 4.0 times
Note 2 – the term loans are secured by a charge over a subsidiary’s machineries and equipment. The loans will mature in 2019.
Note 3 – the term loan is secured by certain investment securities of a subsidiary. It includes the following financial covenants which require the Group to maintain:
– a net worth exceeding the loan covenants granted;– a gearing ratio not exceeding 4.0 times; and – Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) exceeding the loan covenants granted.
ANNUAL REPORT 2018 161.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
26. LONG-TERM LOANS (CONT’D)
Note 4 – the term loan is secured by certain investment property of a subsidiary. It includes the following financial covenants which require the Group to maintain:
– a consolidated tangible net worth not less than $75,000,000;– a gearing ratio not exceeding 3.0 times; and – interest coverage ratio of not less than 3.5 times.
All other term loans are secured by continuing guarantees by the Company.
All the loans are floating rate loans with effective interest rates ranging from 2.8% to 4.9% (31 December 2017: 2.0% to 3.9%, 1 January 2017: 1.5% to 4.7%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.
A reconciliation of liabilities arising from the Group’s financing activities excluding bank overdrafts is as follows:
Cash flows Non-cash flows
2017Foreign exchange
movement 2018$’000 $’000 $’000 $’000
Loans– current 19,237 (13,296) 3 5,944– non-current 88,397 (42,921) 4 45,480
Total 107,634 (56,217) 7 51,424
27. NOTES PAYABLE
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Current – 4.6% notes due
1 April 2019 75,000 – – 75,000 – –
75,000 – – 75,000 – –
Non-current – 4.0% notes due
16 January 2023 99,511 – – 99,511 – –– 4.6% notes due
1 April 2019 – 75,000 75,000 – 75,000 75,000
99,511 75,000 75,000 99,511 75,000 75,000
The Company issued $75 million 4.6% Notes due 1 April 2019 under its $250 million Multicurrency Medium Term Note Programme on 1 April 2016. The notes bear interest at a fixed rate of 4.6% per annum and interest is payable semi-annually from the date of issue.
BREADTALK GROUP162.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
27. NOTES PAYABLE (CONT’D)
On 17 January 2018, the Company also issues another $100 million 4.0% Notes due on 16 January 2023 under its $250 million Multicurrency Medium Term Note Programme on 1 April 2016. The notes bear interest at a fixed rate of 4.0% per annum and interest is payable semi-annually from the date of issue.
The notes are carried at amortised cost with the interest accreting to the amount payable at end of each period until it reaches the principal amount on maturity.
28. SHARE CAPITAL AND TREASURY SHARES
(a) Share capital
Group and Company2018 2017
(Restated)Number of
shares $’000Number of
shares $’000
Issued and fully paid ordinary shares
At beginning and end of the year 563,786,476 33,303 563,786,476 33,303
On 17 May 2018, the Company completed the share split of every one ordinary share in the capital of the Company into two ordinary shares. This resulted in an increase of ordinary shares from 281,893,238 to 563,786,476 shares.
The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.
(b) Treasury shares
Group and Company2018 2017
Number ofshares $’000
Number ofshares $’000
At beginning of the year (915,908) (460) (1,158,120) (587)Treasury shares transferred on
vesting of restricted share grant 406,532 213 242,212 127
At end of the year (509,376) (247) (915,908) (460)
Treasury shares relate to ordinary shares of the Company that is held by the Company.
The number of shares have been adjusted for the effect of the shares split during the year.
ANNUAL REPORT 2018 163.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
28. SHARE CAPITAL AND TREASURY SHARES (CONT’D)
(b) Treasury shares (cont’d)
The Company reissued 406,532 (2017: 242,212) treasury shares during the year pursuant to its restricted share grant at a weighted-average share price of approximately $0.52 (2017: $0.52) each.
29. OTHER RESERVES
Group Company2018 31.12.2017 1.1.2017 2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000 $’000 $’000
Statutory reserve fund (a) 2,954 2,954 2,954 – –Translation reserve (b) 1,835 1,639 3,295 – –Share-based compensation
reserve 616 591 343 616 591 343Capital reserve (c) 177 177 177 177 177 177Premium on acquisition of
non-controlling interests (d) (1,106) (2,160) (1,441) – – –Fair value adjustment
reserve (e) – 15 – – – –
4,476 3,216 5,328 793 768 520
(a) Statutory reserve fund
In accordance with the Foreign Enterprise Law applicable to subsidiaries in the People’s Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries’ registered capital. Subject to the approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.
(b) Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.
(c) Capital reserve
Capital reserve mainly arises from the gain or loss arising from purchase, sale, issue or cancellation of treasury shares. No dividend may be paid and no other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution of assets to members on a winding up) may be made in respect of this reserve.
BREADTALK GROUP164.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
29. ACCUMULATED PROFITS AND OTHER RESERVES (CONT’D)
(d) Premium on acquisition of non-controlling interests
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
At 1 January 2,160 1,441 1,552Changes in equity attributable to non-
controlling interests (Note 14) (1,054) 719 (111)
At 31 December 1,106 2,160 1,441
(e) Fair value adjustment reserve
Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired.
Group2018 31.12.2017 1.1.2017
$’000 $’000 $’000
Net (loss)/gain on available-for-sale financial assets:
Net (loss)/gain on fair value changes during the year (15) 15 –
30. COMMITMENTS AND CONTINGENCIES
(a) Commitments
Expenditure contracted for as at the balance sheet date but not recognised in the financial statements is as follows:
Group Company2018 2017 2018 2017
$’000 $’000 $’000 $’000
in respect of property, plant and equipment 156 165 – –
in respect of investment in equity securities 24,649 – – –
ANNUAL REPORT 2018 165.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
30. COMMITMENTS AND CONTINGENCIES (CONT’D)
(b) Operating lease commitments – as lessee
The Group has various operating lease agreements for equipment, office, central kitchen, food court and retail outlet premises. These non-cancellable leases have remaining non-cancellable lease terms of between less than 1 year and 9 years. Most leases contain renewable options. Some of the leases contain escalation clauses and provide for contingent rentals based on percentages of sales derived from assets held under operating leases. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.
Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows:
Group2018 2017
$’000 $’000
Not later than one year 112,415 117,091Later than one year but not later than five years 203,046 234,735Later than five years 10,868 16,413
326,329 368,239
(c) Operating lease commitments – as lessor
The Group has entered into non-cancellable operating leases to sublease its food court and retail outlet premises. The Company has non-cancellable operating leases for its leasehold property. Future sublease rental receivable as at 31 December is as follows:
Group Company2018 2017 2018 2017
$’000 $’000 $’000 $’000
Not later than one year 58,048 61,722 4,892 6,036Later than one year but not
later than five years 44,250 46,203 5,204 6,406Over five years 10,970 11,673 10,970 11,652
113,268 119,598 21,066 24,094
(d) Corporate guarantees
As at 31 December 2018, the Company has given corporate guarantees to financial institutions in connection with banking facilities provided to its subsidiaries of which $47,418,000 (2017: $82,344,000) of the banking facilities have been utilised as at year end.
BREADTALK GROUP166.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
31. RELATED PARTY DISCLOSURES
(a) Sale and purchase of goods and services
In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place during the year on terms agreed between the parties:
Group2018 2017
$’000 $’000
Income Management fee income from a joint venture 722 627Sales of goods to a joint venture and an associate 1,211 679Purchase of goods from a joint venture 9,740 12,244
ExpensesRental expense to a joint venture 108 98Royalty fees to non-controlling shareholders 4,553 4,222Repair and maintenance fees to an associate 629 439
OthersPurchase of furniture and fittings from a company related to a
director of the Company – 292Purchase of plant and equipment from an associate 3,501 7,870
Company2018 2017
$’000 $’000
Income Management fee income from subsidiaries 21,982 19,911Dividend income from subsidiaries 16,300 24,056Training fee income from subsidiaries 106 309Rental income from subsidiaries 4,986 5,012
Expense Purchase of goods from subsidiaries 314 216Interest expense payable to a subsidiary 486 1,007
ANNUAL REPORT 2018 167.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
31. RELATED PARTY DISCLOSURES (CONT’D)
(b) Compensation of key management personnel
Group2018 2017
$’000 $’000
Salaries and bonus 10,812 8,496Central Provident Fund contributions and other
pension contributions 340 367Share-based payment (RSG plan) 221 –Directors’ fees 183 180Other personnel expenses 443 1,263
Total compensation paid to key management personnel 11,999 10,306
Comprise amounts paid to: Directors of the Company 2,803 1,331Directors of subsidiaries 4,790 5,088Other key management personnel 4,406 3,887
11,999 10,306
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include interest rate risk, foreign currency risk, credit risk, liquidity risk and market price risk. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.
The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.
There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks.
The Group’s and Company’s principal financial instruments comprise bank loans and cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s and Company’s operations. The Group and Company has various other financial assets and liabilities such as trade and other receivables, trade and other payables and related company balances, which arise directly from its operations.
BREADTALK GROUP168.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s exposure to interest rates risk arises primarily from its investment portfolio in fixed deposits and its debt obligations. The Group does not use derivative financial instruments to hedge its investment portfolio. The Group obtains additional financing through bank borrowings. The Group’s policy is to obtain the most favourable interest rates available without increasing its foreign exchange exposure.
Surplus funds are placed with reputable banks.
Sensitivity analysis for interest rate risk
GroupEffect on profit before tax
100 basispoints increase
100 basispoints decrease
$’000 $’000
2018
– Singapore dollar interest rates (711) 711– Chinese Yuan interest rates (2) 2– Hong Kong dollar interest rates (4) 4– New Taiwan dollar interest rates (53) 53– Malaysia Ringgit interest rates (1) 1– Thailand Baht interest rates (23) 23
GroupEffect on profit before tax
100 basispoints increase
100 basispoints decrease
$’000 $’000
2017
– Singapore dollar interest rates (984) 984– Chinese Yuan interest rates (2) 2– Hong Kong dollar interest rates (8) 8– New Taiwan dollar interest rates (57) 57– Malaysia Ringgit interest rates (2) 2– Thailand Baht interest rates (19) 19
ANNUAL REPORT 2018 169.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(b) Foreign currency risk
The Group has transactional currency exposures arising from sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Chinese Yuan (CNY) and Hong Kong Dollar (HKD). The foreign currencies in which these transactions are denominated are mainly United States dollars (USD), HKD, CNY and SGD.
The Group is also exposed to currency translation risk arising from its net investments in foreign operations, in Malaysia, the PRC, Hong Kong, Thailand and United Kingdom. The Group’s net investments in these countries are not hedged as currency positions in Malaysia Ringgit, CNY, HKD, Thai Baht are considered to be long-term in nature.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in the USD, HKD, CNY and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.
GroupEffect on profit
before tax2018 2017
$’000 $’000
Against SGD:USD – strengthened 5% (2017: 5%) 22 1 – weakened 5% (2017: 5%) (22) (1)
CNY – strengthened 5% (2017: 5%) 432 432 – weakened 5% (2017: 5%) (432) (432)
Against CNY:SGD – strengthened 5% (2017: 5%) (29) (29) – weakened 5% (2017: 5%) 29 29
HKD – strengthened 5% (2017: 5%) (25) (33) – weakened 5% (2017: 5%) 25 33
Against HKDSGD – strengthened 5% (2017: 5%) 455 (363) – weakened 5% (2017: 5%) (455) 363
Against Thailand BahtSGD – strengthened 5% (2017: 5%) (62) (177) – weakened 5% (2017: 5%) 62 177
Against New Taiwan DollarSGD – strengthened 5% (2017: 5%) (14) (3) – weakened 5% (2017: 5%) 14 3
BREADTALK GROUP170.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(c) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities, cash and cash equivalents), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.
The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
The Group considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period.
The Group has determined the default event on a financial asset to be when the counterparty fails to make contractual payments, within 30 days to 365 days for trade receivables and other financial assets when they fall due, counterparty goes into bankruptcy or request for a discounted repayment scheme due to financial difficulties.
To assess whether there is a significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at reporting date with the risk of default as at the date of initial recognition. The Group considers available reasonable and supportive forward-looking information which includes the following indicators:
– Internal credit rating
– External credit rating
– Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower’s ability to meet its obligations
– Actual or expected significant changes in the operating results of the borrower
– Significant increases in credit risk on other financial instruments of the same borrower
– Significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers in the group and changes in the operating results of the borrower.
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making contractual payment.
The Group determined that its financial assets are credit-impaired when:
– There is significant difficulty of the issuer or the borrower
– A breach of contract, such as a default or past due event
ANNUAL REPORT 2018 171.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(c) Credit risk (cont’d)
– It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation
– There is a disappearance of an active market for that financial asset because of financial difficulty
The Group categorises a loan or receivable for potential write-off when a debtor fails to make contractual payments more than 120 days past due. Financial assets are written-off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Group. Where loans and receivables have been written-off, the company continues to engage enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
The following are credit risk management practices and quantitative and qualitative information about amounts arising from expected credit losses for each class of financial assets.
Trade receivables, other receivables and amount due from related corporations
The Group provides for lifetime expected credit losses for all trade receivables, other receivables and amount due from related corporations using a provision matrix. The provision rates are determined based on the Group’s historical observed default rates analysed in accordance to days past due by grouping of customers based on geographical region. The loss allowance provision as at 31 December 2018 is determined as follows, the expected credit losses below also incorporate forward-looking information such as forecast of economic conditions where the gross domestic product will deteriorate over the next year, leading to an increased number of defaults.
Summarised below is the information about the credit risk exposure on the Group’s trade receivables, other receivables and amount due from related corporations using provision matrix, grouped by geographical region:
Singapore:
31 December 2018 CurrentMore than 30days past due
More than 60days past due
More than 90 days past due Total
$’000 $’000 $’000 $’000 $’000
Gross carrying amount 25,675 601 474 858 27,608Loss allowance provision (3) (39) (55) (179) (276)
25,672 561 419 679 27,332
Other geographical areas:
31 December 2018 CurrentMore than 30days past due
More than 60days past due
More than 90 days past due Total
$’000 $’000 $’000 $’000 $’000
Gross carrying amount 29,565 3,030 14 295 32,904Loss allowance provision (3) (46) (66) (213) (328)
29,562 2,984 (52) 82 32,576
BREADTALK GROUP172.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(c) Credit risk (cont’d)
Trade receivables, other receivables and amount due from related corporations (cont’d)
Information regarding loss allowance movement of trade receivables, other receivables and amount due from related corporations balances are disclosed in Note 18,19,20.
During the financial year, the Group wrote off $841,000 of trade receivables which are more than 120 days past due as the Group does not expect to receive future cash flows from and there are no recoveries from collection of cash flows previously written off.
Exposure to credit risk
At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by:
– the carrying amount of each class of financial assets recognised in the balance sheets; and
– an amount of $47,418,000 (2017: $82,344,000) relating to corporate guarantees provided by the Company to financial institutions on its subsidiaries’ borrowings and other banking facilities.
Excessive risk concentration
Concentration arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.
In order to avoid excessive concentration of risk, the Group’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.
Credit risk concentration profile
The Group determines concentrations of credit risk by monitoring the country profile of its trade receivables, other receivables and deposits on an on-going basis. The credit risk concentration profile of the Group’s trade receivables, other receivables and deposits at the balance sheet date is as follows:
Group2018 31.12.2017 1.1.2017
$’000 % of total $’000 % of total $’000 % of total
By country:Singapore 24,250 41% 20,930 39% 20,164 38%People’s Republic of China 15,512 27% 18,178 34% 18,968 35%Hong Kong 5,749 10% 4,788 9% 7,987 15%Malaysia 533 1% 1,175 2% 506 1%Indonesia 1,373 2% 577 1% 428 1%Philippines 1,058 2% 1,302 2% 926 2%Thailand 3,025 5% 1,577 4% 1,204 2%Taiwan 2,474 4% 3,141 6% 2,774 5%United Kingdom 3,773 7% – – – –Others 1,038 1% 1,391 3% 505 1%
58,785 100% 53,059 100% 53,462 100%
ANNUAL REPORT 2018 173.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(c) Credit risk (cont’d)
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired
Information regarding financial assets that are either past due or impaired is disclosed in Notes 18 and 19 above.
(d) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the operations of the Group.
Short-term funding may be obtained from short-term loans where necessary.
The table below summarises the maturity profile of the Group’s and the Company’s financial assets and financial liabilities at the balance sheet date based on contractual undiscounted payments:
2018
1 year or less1 to 5 years
Over 5 years Total
Group $’000 $’000 $’000 $’000
Financial assets:Investment securities 22,907 54,945 18,348 96,200Trade and other receivables 57,947 838 – 58,785Amounts due from related corporations 1,124 – – 1,124Amounts due from non-controlling shareholders of
subsidiaries 1,986 – – 1,986Cash and cash equivalents 184,975 – – 184,975
Total undiscounted financial assets 268,939 55,783 18,348 343,070
Financial liabilities:Trade and other payables 94,301 – – 94,301Other liabilities 51,990 – – 51,990Amounts due to related corporations 3,024 – – 3,024Loans and borrowings 23,189 29,647 – 52,836Notes payable 80,725 118,000 – 198,725Loan from a non-controlling shareholder of a
subsidiary (1) 200 – – 200
Total undiscounted financial liabilities 253,429 147,647 – 401,076
Total net undiscounted financial asset/(liabilities) 15,510 (91,864) 18,348 (58,006)
BREADTALK GROUP174.
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NO
TE
S T
O
TH
E F
INA
NC
IAL
ST
AT
EM
EN
TS
For
the
year
end
ed 3
1 D
ecem
ber
2018
32.
FIN
AN
CIA
L RI
SK M
AN
AG
EMEN
T O
BJEC
TIV
ES A
ND
PO
LICI
ES (C
ON
T’D
)
(d
) Liq
uidi
ty r
isk
(con
t’d)
31.1
2.20
171.
1.20
171
year
or
less
1 to
5
year
sO
ver
5 ye
ars
Tota
l1
year
or
less
1 to
5
year
sO
ver
5 ye
ars
Tota
lG
roup
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
Fina
ncia
l ass
ets:
Inve
stmen
t sec
uriti
es14
,776
69,2
409,
970
93,9
8618
,612
59,3
7521
,070
99,0
57Tr
ade
and
othe
r rec
eiva
bles
51,9
521,
107
–53
,059
57,4
721,
413
–58
,885
Am
ount
s du
e fro
m re
late
d co
rpor
atio
ns1,
128
––
1,12
81,
094
––
1,09
4A
mou
nts
due
from
non
-con
trolli
ng
shar
ehol
ders
of s
ubsi
diar
ies
525
––
525
509
––
509
Cas
h an
d ca
sh e
quiv
alen
ts14
1,24
5–
–14
1,24
512
0,58
9–
–12
0,58
9
Tota
l und
isco
unte
d fin
anci
al a
sset
s20
9,62
670
,347
9,97
028
9,94
319
8,27
660
,788
21,0
7028
0,13
4
Fina
ncia
l lia
bilit
ies:
Trad
e an
d ot
her p
ayab
les
87,5
66–
–87
,566
84,4
10–
–84
,410
Oth
er li
abili
ties
50,9
91–
–50
,991
42,0
47–
–42
,047
Am
ount
s du
e to
rela
ted
corp
orat
ions
3,
881
––
3,88
13,
903
––
3,90
3Lo
ans
and
borr
owin
gs57
,718
34,3
0717
,160
109,
185
32,7
4055
,367
20,8
2810
8,93
5N
otes
pay
able
3,45
076
,725
–80
,175
3,45
080
,175
–83
,625
Loan
from
a n
on-c
ontro
lling
sha
reho
lder
of
a s
ubsi
diar
y (1
)20
0–
–20
020
0–
–20
0
Tota
l und
isco
unte
d fin
anci
al li
abili
ties
203,
806
111,
032
17,1
6033
1,99
816
6,75
013
5,54
220
,828
323,
120
Tota
l net
und
isco
unte
d fin
anci
al a
sset
/(li
abili
ties)
5,82
0 (4
0,68
5)(7
,190
)(4
2,05
5)31
,526
(74,
754)
242
(42,
988)
(1)
The
non-
curr
ent l
oan
from
a n
on-c
ontro
lling
sha
reho
lder
of a
sub
sidi
ary
is e
xclu
ded
as th
e lo
an h
as n
o fix
ed te
rms
of re
paym
ent a
nd is
to b
e se
ttled
whe
n th
e ca
sh
flow
of t
he s
ubsi
diar
y pe
rmits
.
ANNUAL REPORT 2018 175.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(d) Liquidity risk (cont’d)
20181 year or
less1 to 5 years
Over 5 years Total
Company $’000 $’000 $’000 $’000
Financial assets:Trade and other receivables 5,534 – – 5,534Amounts due from related corporations 169,312 – – 169,312Cash and cash equivalents 15,729 – – 15,729
Total net undiscounted financial assets 190,575 – – 190,575
Financial liabilities:Trade and other payables 2,471 – – 2,471Other liabilities 7,609 – – 7,609Amounts due to related corporations 67,508 – – 67,508Loans and borrowings 3,432 16,421 – 19,853Note payables 80,725 118,000 – 198,725
Total net undiscounted financial liabilities 161,745 134,421 – 296,166
Total net undiscounted financial assets/(liabilities) 28,830 (134,421) – (105,591)
BREADTALK GROUP176.
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NO
TE
S T
O
TH
E F
INA
NC
IAL
ST
AT
EM
EN
TS
For
the
year
end
ed 3
1 D
ecem
ber
2018
32.
FIN
AN
CIA
L RI
SK M
AN
AG
EMEN
T O
BJEC
TIV
ES A
ND
PO
LICI
ES (C
ON
T’D
)
(d
) Liq
uidi
ty r
isk
(con
t’d)
31.1
2.20
171.
1.20
171
year
or
less
1 to
5
year
sO
ver
5 ye
ars
Tota
l1
year
or
less
1 to
5
year
sO
ver
5 ye
ars
Tota
lCo
mpa
ny$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0
Fina
ncia
l ass
ets:
––
––
–82
5–
825
Trad
e an
d ot
her r
ecei
vabl
es2,
417
––
2,41
74,
269
––
4,26
9A
mou
nts
due
from
rela
ted
corp
orat
ions
105,
149
––
105,
149
61,8
55–
–61
,855
Cas
h an
d ca
sh e
quiv
alen
ts1,
278
––
1,27
88,
488
––
8,48
8
Tota
l net
und
isco
unte
d fin
anci
al a
sset
s10
8,84
4–
–10
8,84
474
,612
825
–75
,437
Fina
ncia
l lia
bilit
ies:
Trad
e an
d ot
her p
ayab
les
1,81
8–
–1,
818
1,83
2–
–1,
832
Oth
er li
abili
ties
7,58
8–
–7,
588
3,97
1–
–3,
971
Am
ount
s du
e to
rela
ted
corp
orat
ions
58,6
48–
–58
,648
31,1
14–
–31
,114
Loan
s an
d bo
rrow
ings
13
,918
18,3
4117
,160
49,4
193,
668
18,3
4120
,828
42,8
37N
ote
paya
bles
3,45
076
,725
–80
,175
3,45
080
,175
–83
,625
Tota
l net
und
isco
unte
d fin
anci
al li
abili
ties
85,4
2295
,066
17,1
6019
7,64
844
,035
98,5
1620
,828
163,
379
Tota
l net
und
isco
unte
d fin
anci
al a
sset
s/(li
abili
ties)
23,4
22(9
5,06
6)(1
7,16
0)(8
8,80
4)30
,577
(97,
691)
(20,
828)
(87,
942)
ANNUAL REPORT 2018 177.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(d) Liquidity risk (cont’d)
The table below shows the contractual expiry by maturity of the Company’s contingent liabilities. The maximum amount of the financial guarantee contracts is allocated to the earliest period in which the guarantee could be called.
1 year or less 1 to 5 years TotalCompany $’000 $’000 $’000
2018Financial guarantees 33,815 13,603 47,418
31.12.2017Financial guarantees 67,487 14,857 82,344
1.1.2017Financial guarantees 39,683 38,768 78,451
(e) Market price risk
Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instrument. This instrument is quoted on the SGX-ST in Singapore and is classified as FVPL financial asset. The Group does not have exposure to commodity price risk.
Sensitivity analysis for equity price risk
At the balance sheet date, if the share price had been 15% (2017: 15%) higher/lower with all other variables held constant, the effect on the Group’s profit before tax would be $21,000 (2017: $30,000) higher/lower, arising as a result of an increase/decrease in the fair value of quoted equity instruments.
BREADTALK GROUP178.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
33. FINANCIAL INSTRUMENTS
The carrying amount by category of financial assets and liabilities are as follows:
Group31.12.2018 1.1.2018 31.12.2017 1.1.2017
$’000 $’000 $’000 $’000
Financial assets carried at:
Amortised costTrade and other receivables 58,785 53,059 53,059 53,462Amount due from related company 1,124 1,128 1,128 1,094Amount due from NCI 1,986 525 525 509Cash and cash equivalent 184,975 141,245 141,245 120,589
Total 246,870 195,957 195,957 175,654
Available for saleInvestment securities – – 45,572 51,467
Total – – 45,572 51,467
Held to maturityInvestment securities – – 39,382 38,633
Total – – 39,382 38,633
Fair value through profit and lossInvestment securities 87,946 84,119 – –
87,946 84,119 – –
Financial liabilities at:
Amortised costTrade and other payables 94,301 87,566 87,566 84,410Other liabilities 51,990 50,991 50,991 42,047Due to related company 3,024 3,881 3,881 3,903Loan from NCI 735 708 708 749Short-term loans 5,944 19,237 19,237 7,215Long-term loans 45,480 88,397 88,397 99,095Notes payables 174,511 75,000 75,000 75,000
Total 375,985 325,780 325,780 312,419
ANNUAL REPORT 2018 179.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES
Fair value hierarchy
The Group categories fair value measurements using a fair value hierarchy that is dependent on the valuation inputs used as follows:
– Level 1 – Quoted prices (unadjusted) in active market for identical assets or liabilities that the Group can access at the measurement date,
– Level 2 – Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and
– Level 3 – Unobservable inputs for the asset or liability.
Fair value measurements that use inputs of different hierarchy levels are categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
(a) Assets and liabilities measured at fair value
The following table shows an analysis of each class of assets and liabilities measured at fair value by level at the end of the reporting period:
Group2018$’000
Fair value measurements at the end of the reporting period using
Quoted prices in active markets for identical instruments
Significant unobservable
inputsother than
quoted prices
Significantunobservable
inputs Total(Level 1) (Level 2) (Level 3)
Assets measured at fair valueFinancial assets:Investment securities at fair value
through profit or lossQuoted equity instruments 142 – – 142Unquoted equity instruments – – 58,703 58,703Unquoted debt instruments – – 24,304 24,304Structured investment – 4,797 – 4,797
Financial assets as at 31 December 2018 142 4,797 83,007 87,946
Non-financial assets:Investment properties – – 39,748 39,748
BREADTALK GROUP180.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(a) Assets and liabilities measured at fair value (cont’d)
Group31.12.2017
$’000Fair value measurements at the end of the reporting period using
Quoted prices in active markets for identical instruments
Significant unobservable
inputsother than
quoted prices
Significantunobservable
inputs Total(Level 1) (Level 2) (Level 3)
Assets measured at fair valueFinancial assets:Available-for-sale financial assetsQuoted equity instruments 200 – – 200
Financial assets as at 31 December 2017 200 – – 200
Non-financial assets:Investment properties – – 39,463 39,463
Financial assets as at 31 December 2017 – – 39,463 39,463
ANNUAL REPORT 2018 181.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(a) Assets and liabilities measured at fair value (cont’d)
Group1.1.2017
$’000Fair value measurements at the end of the reporting period using
Quoted prices in active markets for identical instruments
Significant unobservable
inputsother than
quoted prices
Significantunobservable
inputs Total(Level 1) (Level 2) (Level 3)
Assets measured at fair valueFinancial assets:Available-for-sale financial assetsQuoted equity instruments 1,010 – – 1,010
Financial assets as at 1 January 2017 1,010 – – 1,010
Non-financial assets:Investment properties – – 22,984 22,984
Financial assets as at 1 January 2017 – – 22,984 22,984
Level 1 fair value
Equity instruments (quoted) (Note 13): Fair value is determined by direct reference to their bid price quotations in an active market at the end of the reporting period.
Level 2 fair value measurement
The following is a description of the valuation techniques and inputs used in the fair value measurement for assets and liabilities that are categorised within level 2 of the fair value hierarchy:
Structured investment
The structured product is an autocallable investment where the fair value is derived using the foreign exchange rate of Chinese Yuan for every Singapore Dollar at valuation date.
A significantly weaker Chinese Yuan for every Singapore Dollar would significantly decrease the fair value measurement.
BREADTALK GROUP182.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(a) Assets and liabilities measured at fair value (cont’d)
Level 3 fair value measurements
(i) Information about significant unobservable inputs used in Level 3 fair value measurements
The following table shows the information about fair value measurement using significant unobservable inputs (Level 3)
Description
Fair value as at
31.12.2018Valuation techniques Unobservable inputs Range
Recurring fair value measurementsAt FVPLUnquoted equity
instruments58,703 Discounted
cash flow and asset-based valuation
Rental rates • RMB 150 to RMB 965 per square metre
• $8.50 to $0.60 per square foot
Expected sales proceeds
RMB 43,000 per square foot
Discount to reflect minority stake in investment
10%
Weighted average cost of capital
10%
Capitalisation rate 3.9% to 4.75%
Unquoted debt instruments
24,304 Discounted cash flow
Weighted average cost of capital
9.08% to 10.91%
Interest to be received
$664,000 per annum to $790,000 per annum
Investment properties 39,748 Direct comparison approach
Transacted price of comparable properties
• RMB 54,000 to RMB 55,000 per square metre
• $201 to $451 per square metre
Description
Fair value as at
31.12.2017Valuation techniques Unobservable inputs Range
Recurring fair value measurements
At FVPLInvestment properties 39,463 Direct
comparison approach
Transacted price of comparable properties
• RMB 55,000 to RMB 63,000 per square metre
Investment properties 22,984 Direct comparison approach
Transacted price of comparable properties
• RMB 50,000 to RMB 54,000 per square metre
ANNUAL REPORT 2018 183.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(a) Assets and liabilities measured at fair value (cont’d)
(i) Information about significant unobservable inputs used in Level 3 fair value measurements (cont’d)
Impact of a change in the inputs to the fair value
For unquoted equity securities, a significant increase (decrease) in the expected weighted average cost of capital would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in rental rates, expected sales proceeds, discount to reflect the minority stake in the investment and capitalised rate would result in a significantly lower (higher) fair value measurement.
For unquoted debt securities, a significant increase (decrease) in the expected weighted average cost of capital would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the interest to be received would result in a significantly higher (lower) fair value measurement.
For investment properties, a significant increase (decrease) in the transacted price of comparable properties would result in a significantly higher (lower) fair value measurement.
(ii) Movements in Level 3 assets measured at fair value
GroupFair value measurement using significant
unobservable inputs(Level 3)
2018 31.12.2017 1.1.2017$’000 $’000 $’000
Investment properties:Opening balance 39,463 22,984 24,053Additions – 16,681 –Total gains or losses for the
period– included in other income under
gain from fair adjustment of investment properties (Note 4) 1,081 118 2
Exchange differences (796) (320) (1,071)
Closing balance 39,748 39,463 22,984
BREADTALK GROUP184.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(a) Assets and liabilities measured at fair value (cont’d)
Level 3 fair value measurements
(ii) Movements in Level 3 assets measured at fair value (cont’d)
GroupFair value
measurementusing significant
Unobservable inputs(Level 3)
2018$’000
Investment securities:Opening balance 71,868SFRS(1) 9 adjustment (452)
Opening balance (restated) 71,416Additions 9,427Total gains or losses for the period– included in other income under net gain from fair value adjustment of
investment securities (Note 4) 2,164
83,007
(iii) Valuation policies and procedures
The Group Chief Financial Officer (CFO), who is assisted by the Group Financial Controller (collectively referred to as the “CFO office”) oversees the Group’s financial reporting valuation process and is responsible for setting and documenting the Group’s valuation policies and procedures. In this regard, the CFO office reports to the Group’s Audit Committee.
For all significant financial reporting valuations using valuation models and significant unobservable inputs, it is the Group’s policy to obtain valuation report from the investee engage external valuation experts who possess the relevant credentials and knowledge on the subject of valuation, valuation methodologies and SFRS(I)13 fair value measurement guidance to perform the valuation.
For valuations performed by external valuation experts, the appropriateness of the valuation methodologies and assumptions adopted are reviewed along with the appropriateness and reliability of the inputs (including those developed internally by the Group) used in the valuations.
In selecting the appropriate valuation models and inputs to be adopted for each valuation that uses significant non-observable inputs, external valuation experts are requested to calibrate the valuation models and inputs to actual market transactions (which may include transactions entered into by the Group with third parties as appropriate) that are relevant to the valuation if such information are reasonably available. For valuations that are sensitive to the unobservable inputs used, external valuation experts are required, to the extent practicable to use a minimum of two valuation approaches to allow for cross-checks.
ANNUAL REPORT 2018 185.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(a) Assets and liabilities measured at fair value (cont’d)
Level 3 fair value measurements (cont’d)
(iii) Valuation policies and procedures (cont’d)
Significant changes in fair value measurements from period to period are evaluated for reasonableness. Key drivers of the changes are identified and assessed for reasonableness against relevant information from independent sources, or internal sources if necessary and appropriate.
The CFO office documents and reports its analysis and results of the valuations to the Audit Committee annually. The Audit Committee performs a high-level independent review of the valuation process and results and recommends if any revisions need to be made before presenting the results to the Board of Directors for approval.
(b) Assets and liabilities not carried at fair value but for which fair value is disclosed
The following table shows an analysis of the Group’s assets and liabilities not measured at fair value at 31 December 2018 but for which fair value is disclosed:
Group2018$’000
Significant unobservable
inputsother than
quoted prices
Significant unobservable
inputs Fair valueCarryingamount
(Level 2) (Level 3)
Assets Other receivables (non-current) – 750 750 838
As at 31 December – 750 750 838
LiabilitiesLoan from a non-controlling
shareholder of a subsidiary (non-current) – 480 480 535
As at 31 December – 480 480 535
BREADTALK GROUP186.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(b) Assets and liabilities not carried at fair value but for which fair value is disclosed (cont’d)
Group31.12.2017
$’000Significant
unobservable inputs
other thanquoted prices
Significant unobservable
inputs Fair valueCarryingamount
(Level 2) (Level 3)
Assets Equity instruments (unquoted),
at cost – * * 45,372Debt instruments – 22,561 22,561 26,496Structured products 12,503 – 12,503 12,886Other receivables (non-current) – 915 915 1,107
As at 31 December 12,503 23,476 35,979 85,861
LiabilitiesLoan from non-controlling
shareholder of a subsidiary (non-current) – 420 420 508
As at 31 December – 420 420 508
ANNUAL REPORT 2018 187.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
34. FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
(b) Assets and liabilities not carried at fair value but for which fair value is disclosed (cont’d)
Group1.1.2017
$’000Significant
unobservable inputs
other thanquoted prices
Significant unobservable
inputs Fair valueCarryingamount
(Level 2) (Level 3)
Assets Equity instruments (unquoted),
at cost – * * 50,457Debt instruments – 32,997 32,997 38,633Other receivables (non-current) – 1,197 197 1,413
As at 1 January – 34,194 33,194 90,503
LiabilitiesLoan from a non-controlling
shareholder of a subsidiary (non-current) – 465 465 549
As at 1 January – 465 465 549
Determination of fair value
Current investment in debt instruments, other receivables (non-current), loan to subsidiary, current loan from non-controlling shareholder of a subsidiary
Fair value is estimated by discounting expected future cash flows at market incremental lending rate for similar types of borrowing or leasing arrangements at the balance sheet date.
*Investment in equity instruments (unquoted) at cost
In 2017, fair value information has not been disclosed for the Group’s investments in equity instruments that are carried at cost. These equity instruments represent ordinary shares in companies that are not quoted on any market. Except as disclosed elsewhere in the financial statements, the Group does not intend to dispose of these investments in the foreseeable future.
BREADTALK GROUP188.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
35. CAPITAL MANAGEMENT
Capital includes debt and equity items as disclosed in the table below.
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2018 and 2017.
As disclosed in Note 29, subsidiaries of the Group operating in the PRC are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the respective subsidiaries for the financial year ended 31 December 2018 and 2017.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group includes within net debt, loans and borrowings, note payables, trade and other payables, amounts due to related corporations, less cash and short-term deposits. Capital includes equity attributable to the owners of the Company less the fair value adjustment reserve and restricted statutory reserve fund.
Group2018 2017
$’000 $’000
Loans and borrowings(1) 52,159 108,342Notes payable 174,511 75,000Trade and other payables 97,524 90,326Amounts due to related corporations 3,024 3,881Less: Cash and cash equivalents (184,975) (141,245)
Net debt 142,243 136,304
Equity attributable to the owners of the Company 133,660 129,401Less: – Statutory reserve fund (2,954) (2,954)
Total capital 130,706 126,447
Capital and net debt 272,949 262,751
Gearing ratio 52% 52%
(1) including bank loans and loans from non-controlling shareholders of subsidiaries
ANNUAL REPORT 2018 189.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
36. SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on their products and services, and has four reportable operating segments as follows:
(a) The bakery segment is in the business of manufacturing and retailing of all kinds of food, bakery and confectionary products including franchising.
(b) The food court segment is involved in the management and operation of food courts and food and drinks outlets.
(c) The restaurant segment is in the business of operating food and drinks outlets, eating houses and restaurants.
(d) The 4orth segment is involved in incubating new food and beverage (F&B) business concepts as well as entering into joint ventures or other forms of collaborations with potential F&B partners with whom the Group will take this F&B business to the regional level.
Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss.
Transactions between operating segments are generally based on terms determined on commercial basis.
BREADTALK GROUP190.
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NO
TE
S T
O
TH
E F
INA
NC
IAL
ST
AT
EM
EN
TS
For
the
year
end
ed 3
1 D
ecem
ber
2018
36.
SEG
MEN
T IN
FORM
ATIO
N (C
ON
T’D
)
2018
Bake
ry (1
)Fo
od
Atr
ium
Rest
aura
nt
4ort
h Re
al E
stat
e In
vest
men
t O
ther
s (2
)El
imin
atio
nG
roup
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
Reve
nue
Exte
rnal
sal
es28
2,00
415
6,89
515
2,31
614
,173
–4,
408
–60
9,79
6In
ter-s
egm
ent s
ales
(Not
e A
)1,
606
3,32
0–
15–
2,96
0(7
,901
)–
Tota
l rev
enue
283,
610
160,
215
152,
316
14,1
88–
7,36
8(7
,901
)60
9,79
6
Resu
ltsPr
ofit/
(loss
) fro
m o
pera
tions
6,48
716
,577
22,2
31(3
,724
)6,
551
(8,9
30)
(202
)38
,990
Inte
rest
inco
me
357
190
1,16
842
1,80
62,
237
(2,6
42)
3,15
8In
tere
st ex
pens
e(6
85)
(278
)(1
05)
(198
)(6
,483
)(4
,089
)2,
632
(9,2
06)
Shar
e of
ass
ocia
tes’
resu
lts(4
8)–
––
–(1
,117
)–
(1,1
65)
Shar
e of
join
t ven
ture
s’ re
sults
(911
)27
7–
––
––
(634
)
Segm
ent p
rofit
/(lo
ss)
5,20
016
,766
23,2
94(3
,880
)1,
874
(11,
899)
(212
)31
,143
Tax
expe
nse
(11,
425)
Profi
t for
the
year
19,7
18
Ass
ets
and
liabi
litie
sSe
gmen
t ass
ets
(Not
e A
)15
7,50
113
3,90
411
3,10
082
,531
190,
039
207,
920
(278
,791
)60
6,20
4Ta
x re
cove
rabl
e31
5D
efer
red
tax
asse
ts2,
340
Tota
l ass
ets
608,
859
Segm
ent l
iabi
litie
s14
1,69
512
8,82
648
,165
59,1
19 1
24,0
1421
6,85
1(2
89,3
86)
429,
284
Tax
paya
ble
12,1
86D
efer
red
tax
liabi
litie
s4,
653
Tota
l lia
bilit
ies
446,
123
Oth
er in
form
atio
nIn
vestm
ent i
n as
soci
ates
––
––
–26
,226
–26
,226
Inve
stmen
t in
join
t ven
ture
s8,
225
459
––
––
–8,
684
Add
ition
s to
non
-cur
rent
ass
ets
(Not
e B)
17,0
845,
874
11,2
253,
458
160
10,3
86–
48,1
87D
epre
ciat
ion
and
amor
tisat
ion
16,0
2714
,630
5,91
883
01,
823
1,95
4–
41,1
82O
ther
non
-cas
h (in
com
e)/e
xpen
ses
(Not
e C
)32
11,
522
(5)
2738
238
–2,
141
ANNUAL REPORT 2018 191.
Financial BlackS19003 size:W210x H297 Mac9 Bee 1st Page 191Page 190
S19003-0062_BreadTalk_AR2018_FS_V5.indd 191 16/3/19 9:46 AM
NO
TE
S T
O
TH
E F
INA
NC
IAL
ST
AT
EM
EN
TS
For
the
year
end
ed 3
1 D
ecem
ber
2018
36.
SEG
MEN
T IN
FORM
ATIO
N (C
ON
T’D
)
31.1
2.20
17Ba
kery
(1)
Food
A
triu
mRe
stau
rant
4o
rth
Real
Est
ate
Inve
stm
ent
Oth
ers
(2)
Elim
inat
ion
Gro
up$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0
Reve
nue
Exte
rnal
sal
es29
7,02
014
9,34
614
0,73
27,
859
–4,
622
–59
9,57
9In
ter-s
egm
ent s
ales
(Not
e A
)36
93,
143
––
––
(3,5
12)
–
Tota
l rev
enue
297,
389
152,
489
140,
732
7,85
9–
4,62
2(3
,512
)59
9,57
9
Resu
ltsPr
ofit/
(loss
) fro
m o
pera
tions
9,46
38,
897
24,4
34(3
32)
12,6
58(1
1,14
1)(2
11)
43,7
68In
tere
st in
com
e51
307
1,24
33
1,42
82,
156
(2,9
54)
2,23
4In
tere
st ex
pens
e(7
85)
(418
)(2
)(2
2)(4
,793
)(2
,382
)2,
982
(5,4
20)
Shar
e of
ass
ocia
tes’
resu
lts–
––
––
(883
)–
(883
)Sh
are
of jo
int v
entu
res’
resu
lts87
322
4–
––
––
1,09
7
Segm
ent p
rofit
/(lo
ss)
9,60
29,
010
25,6
75(3
51)
9,29
3(1
2,25
0)(1
83)
40,7
96Ta
x ex
pens
e(1
1,04
7)
Profi
t for
the
year
29,7
49
Ass
ets
and
liabi
litie
sSe
gmen
t ass
ets
(Not
e A
)16
7,50
913
4,91
211
5,22
627
,804
106,
310
154,
603
(157
,310
)54
9,05
4D
efer
red
tax
asse
ts2,
559
Tota
l ass
ets
551,
613
Segm
ent l
iabi
litie
s13
3,63
513
3,92
726
,564
29,3
80 2
5,12
717
2,40
7(1
39,5
43)
381,
497
Tax
paya
ble
10,6
60D
efer
red
tax
liabi
litie
s4,
576
Tota
l lia
bilit
ies
396,
733
Oth
er in
form
atio
nIn
vestm
ent i
n as
soci
ates
40–
––
–26
,642
–26
,682
Inve
stmen
t in
join
t ven
ture
s9,
138
902
––
––
–10
,040
Add
ition
s to
non
-cur
rent
ass
ets
(Not
e B)
7,02
511
,821
7,84
123
1–
5,82
3–
32,7
41D
epre
ciat
ion
and
amor
tisat
ion
13,5
6016
,205
5,69
986
51,
959
2,19
4–
40,4
82O
ther
non
-cas
h (in
com
e)/e
xpen
ses
(Not
e C
)2,
138
1,01
313
432
1–
375
–3,
981
BREADTALK GROUP192.
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NO
TE
S T
O
TH
E F
INA
NC
IAL
ST
AT
EM
EN
TS
For
the
year
end
ed 3
1 D
ecem
ber
2018
36.
SEG
MEN
T IN
FORM
ATIO
N (C
ON
T’D
)
31.1
2.20
17Ba
kery
(1)
Food
A
triu
mRe
stau
rant
4o
rth
Real
Est
ate
Inve
stm
ent
Oth
ers
(2)
Elim
inat
ion
Gro
up$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0$’
000
$’00
0
Reve
nue
Exte
rnal
sal
es29
7,02
014
9,34
614
0,73
27,
859
–4,
622
–59
9,57
9In
ter-s
egm
ent s
ales
(Not
e A
)36
93,
143
––
––
(3,5
12)
–
Tota
l rev
enue
297,
389
152,
489
140,
732
7,85
9–
4,62
2(3
,512
)59
9,57
9
Resu
ltsPr
ofit/
(loss
) fro
m o
pera
tions
9,46
38,
897
24,4
34(3
32)
12,6
58(1
1,14
1)(2
11)
43,7
68In
tere
st in
com
e51
307
1,24
33
1,42
82,
156
(2,9
54)
2,23
4In
tere
st ex
pens
e(7
85)
(418
)(2
)(2
2)(4
,793
)(2
,382
)2,
982
(5,4
20)
Shar
e of
ass
ocia
tes’
resu
lts–
––
––
(883
)–
(883
)Sh
are
of jo
int v
entu
res’
resu
lts87
322
4–
––
––
1,09
7
Segm
ent p
rofit
/(lo
ss)
9,60
29,
010
25,6
75(3
51)
9,29
3(1
2,25
0)(1
83)
40,7
96Ta
x ex
pens
e(1
1,04
7)
Profi
t for
the
year
29,7
49
Ass
ets
and
liabi
litie
sSe
gmen
t ass
ets
(Not
e A
)16
7,50
913
4,91
211
5,22
627
,804
106,
310
154,
603
(157
,310
)54
9,05
4D
efer
red
tax
asse
ts2,
559
Tota
l ass
ets
551,
613
Segm
ent l
iabi
litie
s13
3,63
513
3,92
726
,564
29,3
80 2
5,12
717
2,40
7(1
39,5
43)
381,
497
Tax
paya
ble
10,6
60D
efer
red
tax
liabi
litie
s4,
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ANNUAL REPORT 2018 193.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
36. SEGMENT INFORMATION (CONT’D)
Notes:
(A) Inter-segment sales, assets and liabilities are eliminated on consolidation.
(B) Additions to non-current assets consist of additions to property, plant and equipment, investment property and intangible assets.
(C) Other non-cash (income)/expenses consist of:
• impairment/(write-back of impairment) of property, plant and equipment, intangible assets, investment in associate, receivables, amount due from associates and joint ventures, and provision for reinstatement cost;
• write-off of property, plant and equipment, bad debts and inventories;
• (gain)/loss on disposals of property, plant and equipment and intangible assets;
• share based payment expenses; and
• unrealised foreign exchange (gain)/loss.
Geographical information
Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:
External sales Non-current assets (3)
2018 2017 2018 31.12.2017 1.1.2017$’000 $’000 $’000 $’000
Singapore 352,643 340,144 141,475 143,559 126,153Mainland China 160,406 152,405 54,041 55,687 57,996Hong Kong 50,980 53,908 8,582 8,731 12,686Rest of the world 45,767 53,122 15,134 6,672 13,245
Total 609,796 599,579 219,232 214,649 210,080
(1) Bakery operations comprise operation of bakery retail outlets as well as that operated through franchising.(2) The business segment “Others” comprises the corporate services, treasury functions, investment holding activities and associated
company.(3) Non-current assets information presented above consist of property, plant and equipment, investment properties and intangible
assets.
BREADTALK GROUP194.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
37. DIVIDENDS
Group and Company2018 2017
$’000 $’000
Dividends paid during the year:
Dividends on ordinary shares• Final exempt (one-tier) ordinary dividend for 2017 of 1.0 cent per
share (2017: dividend for 2016 of 1.0 cent per share) 5,627 5,627• Interim exempt (one-tier) dividend for 2018 of 0.5 cent per share
(2017: 1.0 cent per share) 2,823 5,627• Special (one-tier) dividend for 2017 of 0.5 cent per share (2017:
special dividend for 2017 of 1.0 cent per share) 2,814 5,627
11,264 16,881
Proposed but not recognised as a liability as at 31 December:
Dividends on ordinary shares, subject to shareholders’ approval at the Annual General Meeting:
• Final exempt (one-tier) ordinary dividend for 2018 of 1.0 cent per share (2017: 1.0 cent per share) 5,646 5,627
• Special (one-tier) dividend for 2017 of 0.5 cent per share – 2,814
5,646 8,441
The dividend per share takes into account the effect of the shares split during the year.
38. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
Disposal of investment in associate
On 2 January 2019, a wholly owned subsidiary, Star Food Pte Ltd entered into a sales and purchase agreement with CKE Asia Holdco (Cayman) Ltd for the disposal of the entire interest in Carl Karcher Enterprises (Cayman) Ltd (“CKE”), for a consideration of US$500,000. On completion of the transaction, the Group will have no more interest in CKE.
Acquisition of non-controlling interests in subsidiary
On 2 January 2019, a wholly owned indirect subsidiary, Megabite Hong Kong Limited entered into a sales and purchase agreement with Wingain Global Limited for the acquisition of the remaining 25% interest in Food Republic Guangzhou F&B Management Co., Ltd, for a consideration of S$150,000. On completion of the transaction, Food Republic Guangzhou F&B Management Co., Ltd will become a fully owned subsidiary of Megabite Hong Kong Limited.
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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2018
38. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE (CONT’D)
Acquisition of 50% stakes in a joint venture
On 1 January 2019, a wholly owned indirect subsidiary, BreadTalk Corporation (Thailand) Co., Ltd entered into a sales and purchase agreement with The Minor Food Group Plc. for the acquisition of remaining 50% interest in BTM (Thailand) Ltd, for a consideration of THB 160,000,000. On completion of the transaction, BTM (Thailand) Ltd will become a fully owned subsidiary of BreadTalk Corporation (Thailand) Co., Ltd.
39. AUTHORISATION OF FINANCIAL STATEMENTS
The financial statements for the year ended 31 December 2018 were authorised for issue in accordance with a resolution of the directors on 15 March 2019.
BREADTALK GROUP196.
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ANNUAL REPORT 2018 197.
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Issued and Fully Paid-up Capital : 33,303,000No. of Ordinary Shares (excluding treasury shares and subsidiary holdings) : 563,277,100No. of treasury shares and percentage : 509,376 (0.09%)No. of subsidiary holdings held and percentage : NilClass of Shares : Ordinary shareVoting rights : One vote per share
DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholdings Number of Shareholders % Number of Shares %
1 – 99 8 0.31 275 0.00100 – 1,000 248 9.66 146,444 0.031,001 – 10,000 1,441 56.13 7,914,702 1.4110,001 – 1,000,000 847 33.00 43,351,646 7.691,000,001 and above 23 0.90 511,864,033 90.87
TOTAL 2,567 100.00 563,277,100 100.00
TWENTY LARGEST SHAREHOLDERS
No. Name No. of Shares % 1. CITIBANK NOMINEES SINGAPORE PTE LTD 68,880,586 12.232. UNITED OVERSEAS BANK NOMINEES (PRIVATE) LIMITED 62,854,800 11.163. DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 61,847,800 10.984. DBS NOMINEES (PRIVATE) LIMITED 53,053,342 9.425. KATHERINE LEE LIH LENG 51,084,490 9.076. HONG LEONG FINANCE NOMINEES PTE LTD 40,596,700 7.217. DB NOMINEES (SINGAPORE) PTE LTD 35,160,000 6.248. RAFFLES NOMINEES (PTE.) LIMITED 34,384,874 6.109. SBS NOMINEES PRIVATE LIMITED 24,000,000 4.2610. PHILLIP SECURITIES PTE LTD 21,067,800 3.7411. UOB KAY HIAN PRIVATE LIMITED 19,334,900 3.4312. GEORGE QUEK MENG TONG 17,669,770 3.1413. DBSN SERVICES PTE. LTD. 6,242,400 1.1114. LIOW SIEW PIENG 2,798,400 0.5015. ANDRE FRANCIS MANIAM 2,024,500 0.3616. BPSS NOMINEES SINGAPORE (PTE.) LTD. 1,663,822 0.3017. LOY KWEE TSHIR 1,468,900 0.2618. HSBC (SINGAPORE) NOMINEES PTE LTD 1,379,400 0.2419. TEO SWAY HEONG 1,360,000 0.2420. OCBC NOMINEES SINGAPORE PRIVATE LIMITED 1,352,900 0.24
Total : 508,225,384 90.23
STATISTICS OF SHAREHOLDINGAs at 1 March 2019
BREADTALK GROUP198.
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STATISTICS OF SHAREHOLDINGAs at 1 March 2019
SUBSTANTIAL SHAREHOLDERS AS AT 1 MARCH 2019(As recorded in the Register of Substantial Shareholders)
Substantial Shareholders Direct Interest Deemed InterestShares % Shares %
Dr George Quek Meng Tong(1) 191,375,320 33.98 104,830,040 18.61Katherine Lee Lih Leng(1) 104,830,040 18.61 191,375,320 33.98Primacy Investment Limited 78,927,000 14.01 – –Paradice Investment Management LLC(2) – – 35,630,448 6.33PIM US Pty Ltd (as trustee of PIM US Unit Trust)(3) – – 35,630,448 6.33PFH (NSW) Pty Ltd (as trustee of Paradice Family Trust) (4) – – 35,630,448 6.33
Notes:
(1) Katherine Lee Lih Leng is the spouse of George Quek Meng Tong. Saved as disclosed above, there are no family relationship among our Directors and Substantial Shareholders.
(2) Paradice Investment Management LLC (“Paradice LLC”) is a fund manager in the United States which manages various individual client portfolios under the “Global Small Mid Cap” Strategy. As fund manager, Paradice LLC has discretion and authority over the sale and purchase of the abovementioned Shares, and is also entitled to exercise the votes attached to those Shares on behalf of the underlying investor. Therefore, Paradice LLC has deemed interests in the abovementioned Shares.
(3) PIM US Pty Ltd is the appointed trustee of PIM US Unit Trust (“Trust”), and holds the assets of the Trust for the benefit of the Trust’s unit holders, which are all the shares in Paradice LLC, who is a fund manager in the United States, managing individual client portfolios, which includes shares in the Company. Paradice LLC has the discretion and authority over the sale and purchase, and also the ability to exercise votes attached to the shares in the Company, and therefore has deemed interest in the shares.
(4) PFH (NSW) Pty Ltd is the appointed trustee of the Paradice Family Trust (“Paradice Family Trust”) and has legal title to the assets of the Paradice Family Trust, which includes shares in Paradice investment Management Pty Ltd (“PIMPL”). PFH (NSW) Pty Ltd (as trustee of Paradice Family Trust) is entitled to exercise or control the exercise of not less than 20% of the votes attached to the voting shares in PIML, the sole shareholder of PIM US Pty Ltd.
PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HANDS
Based on information available to the Company as at 1 March 2019 approximately 26.27% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with the Rule 723 (at least 10% held at public) of the Listing Manual of SGX-ST.
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NOTICE IS HEREBY GIVEN that the Annual General Meeting (“AGM”) of BreadTalk Group Limited (“Company”) will be held at 30 Tai Seng Street, #09-01 BreadTalk IHQ Singapore 534013 on Monday, 22 April 2019 at 9.30 a.m. for the following purposes:
AS ORDINARY BUSINESS
1. To receive and adopt the Audited Financial Statements and Directors’ Statement of the Company and the Group for the financial year ended 31 December 2018 together with the Auditors’ Report thereon.
(Resolution 1)
2. To declare a final dividend of 1.0 cent per share tax exempt (one-tier) for the financial year ended 31 December 2018. (2017: 1.0 cent)
(Resolution 2)
3. To re-elect the following Directors of the Company retiring pursuant to Regulation 107 of the Constitution of the Company: Regulation 107
Mr. Chan Soo Sen (Resolution 3) Mr. Paul Charles Kenny (Resolution 4)
[See Explanatory Note (i)]
4. To approve the payment of Directors’ fees of S$188,256 for the financial year ended 31 December 2018. (2017: S$182,490) (Resolution 5)
5. To re-appoint Messrs Ernst & Young LLP as the Auditors of the Company and to authorise the Directors of the Company to fix their remuneration.
(Resolution 6) 6. To transact any other ordinary business which may properly be transacted at an AGM.
AS SPECIAL BUSINESS
To consider and if thought fit, to pass the following resolutions as Ordinary Resolution, with or without any modifications:
7. Authority to allot and issue shares in the capital of the Company pursuant to Section 161 of the Companies Act, Chapter 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited
That pursuant to Section 161 of the Companies Act, Chapter 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors of the Company be authorised and empowered to:
(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and
NOTICE OF ANNUAL GENERAL MEETING
BREADTALK GROUP200.
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(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,
provided that:
(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);
(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares and subsidiary holdings) shall be based on the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:
(a) new shares arising from the conversion or exercise of any convertible securities;(b) new shares arising from exercising share options or vesting of share awards which are outstanding or
subsisting at the time of the passing of this Resolution; and(c) any subsequent bonus issue, consolidation or subdivision of shares;
(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Constitution of the Company; and
(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next AGM of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (ii)] (Resolution 7)
8. Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme 2018 (“Scheme”)
That:
Pursuant to Section 161 of the Companies Act, Chapter 50, the Directors of the Company be authorised and empowered to offer and grant options under the Scheme and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme and any other share based schemes (if applicable) shall not exceed fifteen per centum (15%) of the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next AGM of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (iii)] (Resolution 8)
NOTICE OF ANNUAL GENERAL MEETING
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9. Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan 2018 (“Plan”) (for non-controlling shareholders)
That:
When the Remuneration Committee has decided on the grant of any awards in accordance with the provisions of the Plan, and where such awards relate to the issue of new shares, then pursuant to Section 161 of the Companies Act, Chapter 50, the Directors of the Company be authorised and empowered to allot and/or issue from time to time such number of fully-paid shares as may be required to be allotted and/or issued pursuant to the vesting of the awards under the Plan, provided always that the aggregate number of new ordinary shares to be allotted and/or issued pursuant to the Plan and any other share based schemes (if applicable), which the Company may have in place, shall not exceed fifteen per centum (15%) of the total issued shares excluding treasury shares and subsidiary holdings in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next AGM of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (iv)] (Resolution 9)
10. Authority to grant awards to Participants (being controlling shareholders and their associates) pursuant to the Rules of, and issue shares under, the Plan
That:
When the Remuneration Committee has decided on the grant of any awards in accordance with the provisions of the Plan to the controlling shareholders and/or their associates as set out below (“the Participants”), the Directors of the Company be authorised and empowered to grant awards in accordance with the provisions of the Plan to the Participants, and where such Awards relate to the issue of new shares, then pursuant to Section 161 of the Companies Act, Chapter 50, the Directors of the Company be authorised and empowered to allot and/or to issue such number of fully-paid shares in the Company to the Participants of awards granted by the Company under the Plan, provided always that the aggregate number of shares available to Controlling Shareholders and their associates under the Plan shall not exceed twenty five per centum (25%) of all the shares available under the Plan and that the number of shares available to each Controlling Shareholder or his associate shall not exceed ten per centum (10%) of all the shares available under the Plan. Such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the Company’s next AGM or the date by which the next AGM of the Company is required by law to be held, whichever is earlier.
Shares be awarded to the following Participants as set out below:–
Name of Participant No. of shares to be awarded
Associate of Controlling Shareholders
Mr. Frankie Quek Swee Heng 6,990
[See Explanatory Note (v)] (Resolution 10)
NOTICE OF ANNUAL GENERAL MEETING
BREADTALK GROUP202.
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11. Renewal of Share Purchase Mandate
That for the purposes of Sections 76C and 76E of the Companies Act, Chapter 50, the Directors of the Company be and are hereby authorised to make purchases or otherwise acquire issued shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per centum (10%) of the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company (as ascertained as at the date of AGM of the Company) at the price of up to but not exceeding the Maximum Price as defined in paragraph 2.3.4 and 2.7.2 of the Letter to Shareholders dated 22 March 2019 (“Letter”), in accordance with the terms of the Share Purchase Mandate set out in the Letter, and this mandate shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next AGM of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (vi)] (Resolution 11)
By Order of the Board
Chew Kok LiangShirley Tan Sey Liy Company SecretariesSingapore, 22 March 2019
Explanatory Notes:
(i) Mr. Chan Soo Sen will, upon re-election as Director of the Company, remain as the Independent Director, Chairman of the Remuneration Committee and member of the Audit Committee and Nominating Committee of the Company and will be considered independent pursuant to Rule 704(8) of the Listing Manual of the SGX-ST.
Mr. Paul Charles Kenny will, upon re-election as Director of the Company, remain as the Non-Executive Director of the Company.
Please refer to page 62 to 67 in the Annual Report for the detailed information for Mr. Chan Soo Sen and Mr. Paul Charles Kenny required pursuant to Rule 720(5) of the Listing Manual of the SGX-ST.
(ii) The Ordinary Resolution 7 in item 7 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next AGM of the Company, or the date by which the next AGM of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.
For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares and subsidiary holdings) will be calculated based on the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.
(iii) The Ordinary Resolution 8 in item 8 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next AGM of the Company, or the date by which the next AGM of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) 15% of the total number of issued shares excluding treasury shares and subsidiary holdings in the capital of the Company from time to time, and the aggregate number
NOTICE OF ANNUAL GENERAL MEETING
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of ordinary shares which may be issued pursuant to the Scheme and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares and subsidiary holdings from time to time.
(iv) The Ordinary Resolution 9 in item 9 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next AGM, to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan subject to the maximum number of shares prescribed under the terms and conditions of the Plan. The aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share-based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares and subsidiary holdings from time to time.
(v) The Ordinary Resolution 10 in item 10 above, if passed, will empower the Directors of the Company to issue shares in the Company to the associate of Controlling Shareholders, granted by the Company under the Plan. Shareholders who are eligible to participate in the Plan shall abstain from voting on Resolution 10.
The rationale for Resolution 10
Frankie Quek Swee Heng, holds an aggregate of 0.02% of the Company’s shareholding (directly or indirectly). He was appointed as Head, Real Estate with effect from 1 July 2017. In his new role, Frankie Quek oversees the Group’s leasing arrangements in Singapore. This includes sourcing the new locations for all of the Group’s business in Singapore, fronting the Group in all leasing negotiations with the landlords for new leases and renewal of existing leases. Frankie Quek also works closely with the Group’s project department on overall outlet capex investment and ensures that the Group achieves the desired return on investment. Concurrently, Frankie Quek is tasked with the management of the Group’s headquarters – BreadTalk IHQ.
Frankie Quek has been serving the Group since 2005. Prior to his new role, he was appointed as CEO, ASEAN region, on 15 October 2012. Frankie Quek was involved in the formulation and implementation of the expansion plans of the Group within the ASEAN region. With his business acumen and extensive knowledge of the local food and beverage industry, he is assisting the Chairman, Dr. George Quek Meng Tong, in overseeing the growth, expansion and daily operations of the Group, with a focus on the Group’s expansion within the ASEAN region. Frankie Quek has been based in Shanghai since 2005 where he has been overseeing the growing bakery and food court operations in Shanghai and Beijing. His expertise has further led to the successful expansion of the BreadTalk brand name to many ASEAN Cities through a franchise model system managed by the in-house franchise team.
By allowing him to participate in the Plan and the Scheme, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group. Frankie Quek will also be able to share in any future appreciation of the Company’s share price that is commensurate with the Company’s future growth through an increase in his shareholdings to a more significant level.
The Directors are of the view that the remuneration package of Frankie Quek is fair given his contributions to the Group. The extension of the Plan and the Scheme to Frankie Quek is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company.
As the Plan and the Scheme serve as recognition of the past contributions of those eligible to participate in the Plan and the Scheme, as well as to secure future contributions for the Company and the Group from them, the Directors consider it important that Frankie Quek should be included in the Plan and the Scheme. The Directors consider it crucial for the Company to provide sufficient incentives which will instill a sense of commitment to the Group.
Resolution 10 seeks for the above stated reasons, shareholders’ approval for the Directors decision to grant 6,990 shares to Frankie Quek in accordance with the Plan.
NOTICE OF ANNUAL GENERAL MEETING
BREADTALK GROUP204.
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(vi) The Ordinary Resolution 11 in item 11 above, if passed, will empower the Directors of the Company effective until the conclusion of the next AGM of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is the earlier, to repurchase ordinary shares of the Company by way of market purchases or off-market purchases of up to 10% of the total number of issued shares (excluding treasury shares and subsidiary holdings) in the capital of the Company at the Maximum Price as defined in Paragraph 2.3.4 and 2.7.2 to the Letter. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of ordinary shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated financial statements of the Group for the financial year ended 31 December 2018 are set out in greater detail in the Letter.
Notes:
1. A Member of the Company (other than a Relevant Intermediary*) entitled to attend and vote at the AGM (the “Meeting”) is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a Member of the Company.
2. A Relevant Intermediary may appoint more than two proxies, but each proxy must be appointed to exercise the rights attached to a different share or shares held by him (which number and class of shares shall be specified.).
3. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his/her attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.
4. The instrument appointing a proxy must be deposited at the registered office of the Company at 30 Tai Seng Street, #09-01 BreadTalk IHQ, Singapore 534013 not less than seventy-two (72) hours before the time appointed for holding the Meeting.
* A Relevant Intermediary is:
(a) a banking corporation licensed under the Banking Act (Chapter 19) or a wholly-owned subsidiary of such a banking corporation, whose business includes the provision of nominee services and who holds shares in that capacity; or
(b) a person holding a capital markets services licence to provide custodial services for securities under the Securities and Futures Act (Chapter 289) and who holds shares in that capacity; or
(c) the Central Provident Fund Board established by the Central Provident Fund Act (Chapter 36), in respect of shares purchased under the subsidiary legislation made under that Act providing for the making of investments from the contributions and interest standing to the credit of members of the Central Provident Fund, if the Board holds those shares in the capacity of an intermediary pursuant to or in accordance with that subsidiary legislation.
PERSONAL DATA PRIVACY
Where a member of the Company submits an instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company (i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the AGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, proxy lists, minutes and other documents relating to the AGM (including any adjournment thereof), and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty.
NOTICE OF ANNUAL GENERAL MEETING
ANNUAL REPORT 2018 205.
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BREADTALK GROUP206.
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BREADTALK GROUP LIMITED(Company Registration No. 200302045G)(Incorporated In the Republic of Singapore)
ANNUAL GENERAL MEETINGPROXY FORM(Please see notes overleaf before completing this Form)
IMPORTANT:1. An investor who holds shares under the Central Provident Fund Investment
Scheme (“CPF Investor”) and/or the Supplementary Retirement Scheme (“SRS Investors”) (as may be applicable) may attend and cast his vote(s) at the Meeting in person. CPF and SRS Investors, who are unable to attend the Meeting but would like to vote, may inform their CPF and/or SRS Approved Nominees to appoint the Chairman of the Meeting to act as their proxy, in which case, the CPF and SRS Investors shall be precluded from attending the Meeting.
2. This Proxy Form is not valid for use by CPF and SRS Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
I/We, (Name) (NRIC/Passport No.)
of (Address)being a member/members of BREADTALK GROUP LIMITED (the “Company”), hereby appoint:
Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %
Address
and/or (delete as appropriate)Name NRIC/Passport No. Proportion of Shareholdings
No. of Shares %Address
or failing the person, or either or both of the persons, referred to above, the chairman of the meeting as my/our proxy/proxies to attend and vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on Monday, 22 April 2019 at 9.30 a.m. at 30 Tai Seng Street, #09-01 BreadTalk IHQ Singapore 534013 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specifi c direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion.
No. Resolutions relating to: No. of votes
‘For’*No. of votes
‘Against’*Ordinary Resolutions 1 Audited Financial Statements for the fi nancial year ended 31 December 20182 Payment of proposed fi nal dividend3 Re-election of Mr Chan Soo Sen as a Director4 Re-election of Mr Paul Charles Kenny as a Director
5Approval of Directors’ fees amounting to S$188,256 for the fi nancial year ended 31 December 2018
6Re-appointment of Messrs Ernst & Young LLP as Auditors and authority to Directors to fi x remuneration
Special Business7 Authority to issue new shares
8Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme 2018
9Authority to issue shares under the BreadTalk Restricted Share Grant Plan 2018 (“Plan”) (for non-controlling shareholders)
10 Share award under the Plan to Mr Frankie Quek Swee Heng11 Renewal of Share Purchase Mandate
*If you wish to exercise all your votes ‘For’ or ‘Against’, please tick (√) within the box provided. Alternatively, please indicate the number of votes as appropriate.
Dated this day of 2019
Total number of Shares in: No. of Shares(a) CDP Register
Signature of Shareholder(s)and/or, Common Seal of Corporate Shareholder
(b) Register of Members
*Delete where inapplicable
IMPORTANT: PLEASE READ NOTES OVERLEAF
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Notes:1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 81SF
of the Securities and Futures Act, Chapter 289 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2. A member of the Company (other than a Relevant Intermediary*), entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.
3. Where a member (other than a Relevant Intermediary*) appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specified, the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named.
4. A Relevant Intermediary may appoint more than two proxies, but each proxy must be appointed to exercise the rights attached to a different share or shares held by him (which number or class of shares shall be specified).
5. Subject to note 9, completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.
6. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 30 Tai Seng Street, #09-01 BreadTalk IHQ, Singapore 534013 not less than seventy-two (72) hours before the time appointed for the Meeting.
7. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised or in such manner as appropriate under applicable laws. Where the original instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the original power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the original instrument of proxy and must be left at the Registered Office, not less than 72 hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid.
Notes:
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 81SF of the Securities and Futures Act, Chapter 289 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2. A member of the Company (other than a Relevant Intermediary*), entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.
3. Where a member (other than a Relevant Intermediary*) appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specified, the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named.
4. A Relevant Intermediary* may appoint more than two proxies, but each proxy must be appointed to exercise the rights attached to a different share or shares held by him (which number or class of shares shall be specified).
5. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.
6. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 30 Tai Seng Street, #09-01 BreadTalk IHQ, Singapore 534013 not less than seventy-two (72) hours before the time appointed for the Meeting.
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The Company Secretary BREADTALK GROUP LIMITED
30 Tai Seng Street#09-01 BreadTalk IHQ
Singapore 534013
Postage willbe paid byaddressee.
For posting inSingapore only.
7. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised or in such manner as appropriate under applicable laws. Where the original instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the original power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the original instrument of proxy and must be left at the Registered Office, not less than seventy-two (72) hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid.
8. A corporation which is a member may authorize by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore, and the person so authorised shall upon production of a copy of such resolution certified by a director of the corporation to be a true copy, be entitled to exercise the powers on behalf of the corporation so represented as the corporation could exercise in person if it were an individual.
* A “Relevant Intermediary” has the meaning ascribed to it in Section 181 of the Companies Act, Chapter 50 of Singapore.
GENERAL:The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at seventy two (72) hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.
PERSONAL DATA PRIVACY:By submitting an instrument appointing a proxy(ies) and/or representative(s), the member accepts and agrees to the personal data privacy terms set out in the Notice of Annual General Meeting dated 22 March 2018.
BUSINESS REPLY SERVICE
PERMIT NO. 08969
SINGAPORE
BUSINESS REPLY SERVICE
PERMIT NO. 08969
SINGAPORE
8. A corporation which is a member may authorize by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore, and the person so authorised shall upon production of a copy of such resolution certified by a director of the corporation to be a true copy, be entitled to exercise the powers on behalf of the corporation so represented as the corporation could exercise in person if it were an individual.
9. An investor who holds shares under the Central Provident Fund Investment Scheme (“CPF Investor”) and/or the Supplementary Retirement Scheme (“SRS Investors”) (as may be applicable) may attend and cast his vote(s) at the Meeting in person. CPF and SRS Investors who are unable to attend the Meeting but would like to vote, may inform their CPF and/or SRS Approved Nominees to appoint the Chairman of the Meeting to act as their proxy, in which case, the CPF and SRS Investors shall be precluded from attending the Meeting.
* A “Relevant Intermediary” has the meaning ascribed to it in Section 181 of the Companies Act, Chapter 50 of Singapore.
GENERAL:
The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at seventy two (72) hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.
PERSONAL DATA PRIVACY:
By submitting an instrument appointing a proxy(ies) and/or representative(s), the member accepts and agrees to the personal data privacy terms set out in the Notice of Annual General Meeting dated 22 March 2019.
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The Company SecretaryBREADTALK GROUP LIMITED
30 Tai Seng Street#09-01 BreadTalk IHQ
Singapore 534013
SINGAPORE
Postage willbe paid byaddressee.
For posting inSingapore only.
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CONTENTS
01 CORPORATE PROFILE
10 FINANCIAL HIGHLIGHTS
12 CHAIRMAN’S MESSAGE
14 GROUP CEO’S MESSAGE
17 BOARD OF DIRECTORS
21 SENIOR MANAGEMENT TEAM
24 AWARDS & ACCOLADES
26 BREADTALK GROUP LIMITED & SUBSIDIARIES
28 GEOGRAPHICAL REACH
30 BUSINESS REVIEW: BAKERY
34 BUSINESS REVIEW: FOOD ATRIUM
36 BUSINESS REVIEW: RESTAURANT
38 BUSINESS REVIEW: 4ORTH FOOD CONCEPTS
40 INVESTOR RELATIONS
41 CORPORATE GOVERNANCE
69 FINANCIAL STATEMENTS
198 STATISTICS OF SHAREHOLDINGS
200 NOTICE OF ANNUAL GENERAL MEETING
INSIDE BACK COVER CORPORATE INFORMATION
CORPORATE INFORMATION
DIRECTORS
• Dr George Quek Meng Tong• Ms Katherine Lee Lih Leng• Mr Ong Kian Min• Mr Chan Soo Sen• Dr Tan Khee Giap• Mr Paul Charles Kenny
COMPANY SECRETARIES
• Chew Kok Liang • Shirley Tan Sey Liy
REGISTERED OFFICE
30 Tai Seng Street#09-01 BreadTalk IHQSingapore 534013Tel: 6285 6116Fax: 6285 1661
BANKERS
• China Construction Bank• DBS Bank Ltd• JPMorgan Chase Bank, N.A.• Oversea-Chinese Banking
Corporation Limited• Standard Chartered Bank
(Singapore) Limited• United Overseas Bank Limited
SHARE REGISTRAR
RHT Corporate Advisory Pte Ltd9 Raffles Place #29-01Republic Plaza Tower 1Singapore 048619
AUDITORS
Ernst & Young LLPOne Raffles QuayNorth Tower Level 18Singapore 048583
Partner in charge: Philip Ling (since financial year ended 31 December 2016)
ANNUAL REPORT 2018
IBCIFC
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BREADTALK IHQ30 TAI SENG STREET #09-01 SINGAPORE 534013
w w w . b r e a d t a l k . c o m
ANNUALREPORT
2018
CHAIRMAN’S MESSAGEpg 12
Inspiring innovative F&B concepts; delighting the world everyday
BUSINESS REVIEWSpg 30
Strengthening brands and widening footprint
GROUP CEO’S MESSAGEpg 14
Spearheading the Group’s portfolio growth and expansion into new markets
AN
NU
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RE
PO
RT
2018BREA
DTA
LK G
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UP LIM
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BREADTALK IHQ30 TAI SENG STREET #09-01 SINGAPORE 534013
w w w . b r e a d t a l k . c o m
ANNUALREPORT
2018
CHAIRMAN’S MESSAGEpg 12
Inspiring innovative F&B concepts; delighting the world everyday
BUSINESS REVIEWSpg 30
Strengthening brands and widening footprint
GROUP CEO’S MESSAGEpg 14
Spearheading the Group’s portfolio growth and expansion into new markets
AN
NU
AL
RE
PO
RT
2018BREA
DTA
LK G
RO
UP LIM
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